I Important Notice, Table of Contents and Definitions
The board of directors (the “Board”), the supervisory committee (the “Supervisory Committee”) and the directors (the “Directors”),
supervisors (the “Supervisors”) and senior management (the “Senior Management”) of the Company hereby warrant the
truthfulness, accuracy and completeness of the contents of the annual report, guarantee that there are no false representations,
misleading statements or material omissions contained in this Report, and are jointly and severally responsible for the liabilities of
the Company.
Chen Hongguo, head of the Company, Hu Jinbao, head in charge of accounting and Zhang Bo, head of the accounting
department (Accounting Officer), declare that they warrant the truthfulness, accuracy and completeness of the financial
statements in the annual report.
All Directors were present in person at the Board meeting to consider and approve this Report except the following Director.
Name of the Director Capacity of the Director
unable to attend unable to attend Reason for failure to attend
the meeting in person the meeting in person the meeting in person Name of the proxy
Pan Ailing Independent Director Health reasons Wang Fengrong
The Company is exposed to various risk factors such as macro-economic fluctuation, adjustment of state policy and competition
in the industry. Investor should be aware of investment risks. For further details, please refer to the risk factors likely to be faced
and the measures to be taken to address them as set out in the outlook on the future development of the Company in Discussion
and Analysis of Operations.
The proposed profit distribution plan of the Company was considered and passed by the Board:
The audited consolidated net profit attributable to shareholders of the Company for 2017 prepared in accordance with Accounting
Standards for Business Enterprises by the Company amounted to RMB3,769,325,450.93. When deducting the interest for
perpetual bonds of RMB153,140,000 for 2017 and the dividend for preference shares of RMB333,702,107.35, the distributable
profit realised for 2017 amounted to RMB3,282,483,343.58.
In accordance with the requirements of the Articles of Association and the Prospectus of Non-public Issuance of Preference
Shares, based on the total ordinary share capital of 1,936,405,467 shares as at the end of 2017 and the 774,526,678 simulated
ordinary shares converted from the preference shares using a conversion ratio of 1 share valued at RMB5.81 as at the end of
2017, a cash dividend of RMB6 (tax inclusive) per ten shares will be distributed to ordinary shareholders, a cash dividend of
RMB6 (tax inclusive) per ten simulated ordinary shares converted from the preference shares will be distributed to holders of
preference shares, and a capitalisation issue made out of the capital reserves of 5 shares for every ten shares held to ordinary
shareholders. A cash dividend of RMB of RMB1,161,843,280.20 will be distributed to ordinary shareholders and a variable cash
dividend of RMB464,716,006.88 will be distributed to holders of preference shares. In other words, a cash dividend of RMB10.33
(tax inclusive) per preference share with a nominal value of RMB100 each will be distributed to holders of preference shares. No
bonus shares (tax inclusive) will be issued.
2017 ANNUAL REPORT
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OUTPUT: 27-03-2018 16:29:21
I Important Notice, Table of Contents and Definitions
Table of Contents
I Important Notice, Table of Contents and Definitions .............................................................................................. []
II Company Profile and Key Financial Indicators ....................................................................................................... []
III Chairman’s Report .................................................................................................................................................. []
IV Business Overview .................................................................................................................................................. []
V Discussion and Analysis of Operations ................................................................................................................... []
VI Directors’ Report ..................................................................................................................................................... []
VII Material Matters ...................................................................................................................................................... []
VIII Changes in Share Capital and Shareholders .......................................................................................................... []
IX Preference Shares. .................................................................................................................................................. []
X Directors, Supervisors and Senior Management and Staff ..................................................................................... []
XI Corporate Governance ............................................................................................................................................ []
XII Corporate Bonds ..................................................................................................................................................... []
XIII Financial Report ...................................................................................................................................................... []
XIV Documents Available for Inspection........................................................................................................................ []
2 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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I Important Notice, Table of Contents and Definitions
Definitions
Item means Definition
Company, Group, Chenming means Shandong Chenming Paper Holdings Limited and its subsidiaries
Group or Chenming Paper
Parent Company or means Shandong Chenming Paper Holdings Limited
Shouguang Headquarters
Chenming Holdings means Shouguang Chenming Holdings Company Limited
Shenzhen Stock Exchange means Shenzhen Stock Exchange
Stock Exchange means The Stock Exchange of Hong Kong
CSRC means China Securities Regulatory Commission
Shandong CSRC means Shandong branch of China Securities Regulatory Commission
Zhanjiang Chenming means Zhanjiang Chenming Pulp & Paper Co., Ltd.
Jiangxi Chenming means Jiangxi Chenming Paper Co., Ltd.
Wuhan Chenming means Wuhan Chenming Hanyang Paper Holdings Co., Ltd.
Chenming (HK) means Chenming (HK) Limited
Haiming Mining means Haicheng Haiming Mining Company Limited
Jilin Chenming means Jilin Chenming Paper Co., Ltd.
Shouguang Meilun means Shouguang Meilun Paper Co., Ltd.
Chenming Sales Company means Shandong Chenming Paper Sales Company Limited
Finance Company means Shandong Chenming Group Finance Co., Ltd.
Financial Leasing Company means Shandong Chenming Financial Leasing Co., Ltd.
reporting period or the year means The period from 1 January 2017 to 31 December 2017
the beginning of the year or means 1 January 2017
the period
the end of the year or the period means 31 December 2017
the prior year means The period from 1 January 2016 to 31 December 2016
2017 ANNUAL REPORT 3
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OUTPUT: 27-03-2018 16:29:21
II Company Profile and Key Financial Indicators
I. Company profile
Stock abbreviation Stock code
B Stock code
01 Stock code
02 Stock code
03 Stock code
Stock exchanges on which the shares are listed Shenzhen Stock Exchange
Stock abbreviation Stock code
Stock exchanges on which the shares are listed The Stock Exchange of Hong Kong Limited
Legal name in Chinese of the Company
Legal short name in Chinese of the Company
Legal name in English of the Company (if any) SHANDONG CHENMING PAPER HOLDINGS LIMITED
Legal short name in English of the Company (if any) SCPH
Legal representative of the Company Chen Hongguo
Registered address No. 595 Shengcheng Road, Shouguang City, Shandong Province
Postal code of registered address
Office address No. 2199 Nongsheng East Road, Shouguang City, Shandong Province
Postal code of office address
Website of the Company http://www.chenmingpaper.com
Email address chenmmingpaper@163.com
II. Contact persons and contact methods
Secretary to the Board (Acting) Securities Affairs Representative Hong Kong Company Secretary
Name Chen Hongguo Yuan Xikun Poon Shiu Cheong
Correspondence address No. 2199 Nongsheng East Road, No. 2199 Nongsheng East Road, 22nd Floor, World Wide House,
Shouguang City, Shandong Province Shouguang City, Shandong Province Central, Hong Kong
Telephone (86)-0536-2158008 (86)-0536-2158008 (852)-2501 0088
Facsimile (86)-0536-2158977 (86)-0536-2158977 (852)-2501 0028
Email address chenmmingpaper@163.com chenmmingpaper@163.com kentpoon_1009@yahoo.com.hk
III. Information disclosure and places for inspection
Designated media for information disclosure China Securities Journal, Shanghai Securities News, Securities Times,
Securities Daily and Hong Kong Commercial Daily
Designated websites for the publication of Domestic: http://www.cninfo.com.cn; Overseas: http://www.hkex.com.hk
the Annual Report as approved by CSRC
Places for inspection of the Company’s Securities investment department of the Company
Annual Report
IV. Change in registration
Organisation registration code
Change of principal activities since its listing No
(if any)
Change of the controlling shareholder (if any) No
4 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:23
II Company Profile and Key Financial Indicators
V. Other relevant information
CPAs engaged by the Company
Name of CPAs Ruihua Certified Public Accountants (Special General Partnership)
CPAs’ Office Address 4/F, Tower 2, No. 16 Xisihuanzhong Road, Haidian District, Beijing
Name of the Signing Certified Zhao Yanmei and Wang Zongpei
Public Accountants
Sponsors engaged by the Company to continuously perform its supervisory function during the reporting period
√ Applicable Not applicable
Name of the
Name of sponsor Sponsor’ office address representatives of sponsor Period under ongoing supervision
CSC Financial Co., Ltd. 9/F, Block B and E, Kaiheng Center, Song Shuangxi and 1 January 2017 - 31 December 2017
No. 2 Chaonei Avenue, Shen Xiqiang
Dongcheng District, Beijing
Financial Advisors engaged by the Company to continuously perform its supervisory function during the reporting period
Applicable √ Not applicable
VI. Major accounting data and financial indicators
Retrospective adjustment to or restatement of the accounting data for prior years by the Company
√ Yes No
Reason for retrospective adjustment or restatement
Correction of accounting errors
Increase/decrease
for the year as
compared to the
2017 2016 prior year
Before After After Before After
adjustment adjustment adjustment adjustment adjustment
Revenue (RMB) 29,851,743,848.13 22,907,118,241.84 22,907,118,241.84 30.32% 20,241,906,131.81 20,241,906,131.81
Net profit attributable to shareholders
of the Company (RMB) 3,769,325,450.93 2,063,986,822.25 1,998,578,788.75 88.60% 1,021,224,678.04 1,086,632,711.54
Net profit after extraordinary gains or losses
attributable to shareholders
of the Company (RMB) 3,425,779,016.95 1,611,533,699.22 1,546,125,665.72 121.57% 719,891,359.63 785,299,393.13
Net cash flows from operating activities (RMB) 23,766,042.93 2,153,049,269.84 2,153,049,269.84 -98.90% -9,721,363,524.30 -9,721,363,524.30
Basic earnings per share (RMB per share) 1.70 0.99 0.95 78.95% 0.50 0.53
Diluted earnings per share (RMB per share) 1.70 0.99 0.95 78.95% 0.50 0.53
Rate of return on net assets on weighted
average basis 15.80% 9.59% 9.23% 6.57% 6.73% 7.17%
VI. Major accounting data and financial indicators
2017 ANNUAL REPORT
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OUTPUT: 27-03-2018 16:29:23
II Company Profile and Key Financial Indicators
VI. Major accounting data and financial indicators (Cont’d)
Increase/decrease
as at the end of
the year compared
As at the As at the to the end of As at the
end of 2017 end of 2016 the prior year end of 2015
Before After After Before After
adjustment adjustment adjustment adjustment adjustment
Total assets (RMB) 105,625,096,076.92 82,285,354,532.15 82,285,354,532.15 28.36% 77,961,699,547.59 77,961,154,948.14
Net assets attributable to shareholders
of the Company (RMB) 27,778,529,074.90 22,218,808,367.43 22,218,808,367.43 25.02% 16,871,494,584.82 16,936,902,618.32
1. Reason for accounting policy change and correction of accounting errors:
Zhanjiang Chenming Pulp & Paper Co., Ltd., a subsidiary of the Company, proceeded to apply for the certification as a
high and new technology enterprise in 2015. The Company received its high and new technology enterprise certificate and
made a related announcement on 28 March 2016. The annual report of the Company was published on 30 March 2016.
As the time of receipt of the certificate and the publication date were close, the Company continued to make a provision
for the income tax expenses of Zhanjiang Chenming at an income tax rate of 25% for 2015. In May 2016, when Zhanjiang
Chenming made the final settlement and payment of the income tax for 2015, the taxation authority agreed that the income
tax for 2015 was calculated and paid at a tax rate of 15%, and returned the excessive tax amount of RMB65,952,632.95
in August 2016. The excessive tax amount received by the Company was directly used to offset against the income tax
expenses for 2016. As a result, the respective income tax amounts for 2015 and 2016 contained errors and the Company
made a correction for prior years during the year. The deferred income tax assets as at 31 December 2015 deceased by
RMB544,599.45 and the income tax expenses for 2015 decreased by RMB65,408,033.50 when the Company made a
provision for the income tax expenses at an income tax rate of 15% for 2015 (The income tax expenses for the period also
decreased by RMB65,952,632.95 and the deferred income tax expenses increased by RMB544,599.45).
2. Data specification of basic earnings per share, diluted earnings per share, weighted average return on
equity:
The net profit attributable to the shareholders of the listed company did not deduct any other equity instruments—perpetual
debt can be deferred and accrued to the interest paid in subsequent periods and the impact of dividends on the preference
shares of other equity instruments that have been released after being reviewed and approved. When calculating the
financial indicators of earnings per share and weighted average return on net assets, the interest on perpetual bonds of
RMB 153,140,000.00 and dividends on issuance of preference shares of RMB 333,702,107.35 are deducted during the
reporting period. For details, please refer to section 13 and note 17.2 of this report.
VII. Differences in accounting data under domestic and overseas accounting standards
1. Differences between the net profit and net assets disclosed in accordance with international
accounting standards and China accounting standards in the financial report
Applicable √ Not applicable
There was no difference between the net profit and net assets disclosed in accordance with international accounting
standards and China accounting standards in the financial report during the reporting period.
2. Differences between the net profit and net assets disclosed in accordance with overseas accounting
standards and China accounting standards in the financial report
Applicable √ Not applicable
There was no difference between the net profit and net assets disclosed in accordance with overseas accounting
standards and China accounting standards in the financial report during the reporting period.
6 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:23
II Company Profile and Key Financial Indicators
VIII. Key Financial Indicators by Quarter
Unit: RMB
Q1 Q2 Q3 Q4
Revenue 6,274,273,821.63 7,474,961,185.61 8,179,965,762.07 7,922,543,078.82
Net profit attributable to shareholders
of the Company 702,517,923.91 1,042,996,914.32 966,000,240.51 1,057,810,372.19
Net profit after extraordinary gains or losses
attributable to shareholders of the Company 615,479,547.22 1,007,815,010.99 927,544,638.20 874,939,820.54
Net cash flows from operating activities -1,799,933,755.66 -2,313,008,012.73 2,499,802,074.06 1,636,905,737.26
Whether the above indicators or their aggregated amounts have any material difference with the respective amounts as
disclosed in the quarterly report or interim report
Yes √ No
IX. Five-year financial summary under paragraph 19 of appendix 16 of the Hong Kong Listing
Rules
Unit: RMB’0,000
For the year ended 31 December
2017 2016 2015 2014
Before After Before After a
adjustment adjustment adjustment djustment
Revenue 2,985,174 2,290,711 2,290,711 2,024,191 2,024,191 1,910,168 2,038,889
Profit before tax 453,648 258,317 258,317 141,017 141,017 56,101 86,629
Tax 77,752 56,056 62,597 43,224 36,683 10,770 17,594
Profit for the current period
attributable to shareholders
of the listed company 376,933 206,399 199,858 102,122 108,663 50,520 71,066
Minority interests -1,036 -4,138 -4,138 -4,329 -4,329 -5,190 -2,030
Basic earnings per share
(RMB/share) 1.7 0.99 0.95 0.50 0.53 0.26 0.35
Rate of return on net assets
on weighted average basis (%) 15.80% 9.59% 9.23% 6.73% 7.17% 3.62% 5.11%
Unit: RMB’0,000
For the year ended 31 December
2017 2016 2015 2014
Before After Before After
adjustment adjustment adjustment adjustment
Total assets 10,562,510 8,228,535 8,228,535 7,796,170 7,796,116 5,682,203 4,752,188
Total liabilities 7,535,092 5,972,050 5,972,050 6,070,277 6,063,736 4,247,396 3,288,353
Minority interests 249,565 34,605 34,605 38,743 38,743 43,073 59,847
Equity attributable to shareholders
of the listed company 2,777,853 2,221,881 2,221,881 1,687,149 1,693,690 1,391,734 1,403,989
Net current assets/(liabilities) -783,090 -1,094,182 -1,094,182 -1,347,029 -1,340,488 -452,549 -106,347
Total assets less current liabilities 4,837,646 3,557,671 3,557,671 2,932,756 2,939,242 2,872,637 2,823,321
2017 ANNUAL REPORT
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OUTPUT: 27-03-2018 16:29:23
II Company Profile and Key Financial Indicators
X. Items and amounts of extraordinary gains or losses
√ Applicable Not applicable
Unit: RMB
Item Amount for 2017 Amount for 2016 Amount for 2015 Explanation
Profit or loss from disposal of non-current
assets (including write-off of provision
for assets impairment) 65,853,273.77 -1,536,454.18 18,317,909.85
Government grants (except for the
government grants closely related to
the normal operation of the company
and granted constantly at a fixed
amount or quantity in accordance with
a certain standard based on state
policies) accounted for in profit or loss for
the current period 392,774,230.02 472,476,962.83 244,716,579.78
Gain arising from investment costs for
acquisition of subsidiaries, associates
and joint ventures by the corporation
being less than its share of fair value of
identifiable net assets of the investees
on acquisition 143,867,008.14
Profit or loss from debt restructuring 24,309.62 -90,997.90 32,089,863.80
Gain or loss arising from contingent items
unrelated to the ordinary course of
business of the Company -325,259,082.28
Except for effective hedging business
conducted in the ordinary course of
business of the Company, gain or
loss arising from the change in fair
value of financial assets held for trading
and financial liabilities held for trading,
as well as investment gains from disposal
of financial assets held for trading and
financial liabilities held for trading and
available-for-sale financial assets 94,000,000.00
Gain or loss on external entrusted loans 13,312,368.97 87,608,490.56 94,777,777.77
Gain or loss from changes in fair value of
consumable biological assets
subsequently measured at fair value -21,000,042.33 -20,084,425.90 -19,078,538.02
Non-operating gains and losses other than
the above items 33,659,216.99 10,022,635.89 10,274,311.04
Less: Effect of income tax 50,196,013.15 92,004,074.27 76,729,624.38
Effect of minority interests (after tax) 3,488,835.77 3,939,014.00 3,034,961.43
Total 343,546,433.98 452,453,123.03 301,333,318.41
8 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:23
II Company Profile and Key Financial Indicators
Notes for the Company’s extraordinary gain or loss items as defined in the Explanatory Announcement on Information
Disclosure for Companies Offering Their Securities to the Public No.1 - Extraordinary Gains or Losses and the extraordinary
gain or loss items as illustrated in the Explanatory Announcement on Information Disclosure for Companies Offering Their
Securities to the Public No.1 - Extraordinary Gains or Losses defined as its recurring gain or loss items
Applicable √ Not applicable
No extraordinary gain or loss items as defined or illustrated in the Explanatory Announcement on Information Disclosure for
Companies Offering Their Securities to the Public No.1 - Extraordinary Gains or Losses were defined by the Company as its
recurring gain or loss items during the reporting period.
2017 ANNUAL REPORT
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OUTPUT: 27-03-2018 16:29:23
III Chairman’s Report
Dear Shareholders,
I am pleased to present to all shareholders the report of the Company for the financial year ended 31 December 2017. On behalf
of the Board, I express my sincere gratitude to all shareholders for their concern and support rendered to Chenming Paper.
The supply-side reform continuously developed. The industrial structure was consistently adjusted. The environmental protection
policies became more specific and stricter. Commercial and development opportunities arose for some enterprises and an
industry reshuffle accelerated to deepen the industry concentration, and therefore the industry continued to prosper. On the
one hand, the prices of paper products increased due to the increased costs of, among other things, wood pulp, waste paper
and logistics. The leading enterprises maintained their cost advantage with their pulp inventories and their own pulp production
capacity and improved their profitability. On the other hand, the financial leasing business became an integral part of the
Company’s profit while enjoying good development momentum.
In 2017, facing the complex macroeconomic conditions, as well as the pressure from the market, environmental protection and
increasing costs, the Company, aiming at “developing into an enterprise with hundreds of billions in value and forging Chenming
into a centennial brand”, committed itself to “team building, management enhancement, outstanding business performance and
good results” to strive for progress and be innovative and practical, and comprehensively improved its quality and efficiency,
management level, technology application, sense of happiness and brand image. It successfully completed all the work targets for
the year and achieved very satisfactory results.
I. Results of Operations
In 2017, the Company completed the production of machine-made paper of 5.10 million tonnes with sales of 4.96 million
tonnes and achieved revenue of RMB29.852 billion, a year-on-year increase of 30.32%. The Company recorded operating
costs of RMB19.729 billion, a year-on-year increase of 24.97%. Total profit and net profit attributable to equity holders of
the Company were RMB4,536 million and RMB3,769 million respectively, up by 75.62% and 88.60% from the prior year.
The Company’s total assets amounted to RMB105.625 billion. The financial segment experienced stable development
across businesses with ever improving management systems and effective risk preventions.
II. Corporate Governance
During the reporting period, the Company regulated its operation under the requirements of Companies Law, Securities
Law, Code of Corporate Governance for Listed Companies, Rules Governing Listing of Stocks on Shenzhen Stock
Exchange, Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the related
provisions of the China Securities Regulatory Commission. The Company kept on improving and optimising its legal person
governance structure and regulating its operation in practice. The Board considered the state of the Company’s corporate
governance was substantially in compliance with the requirements and requests of the regulatory documents such as Code
of Corporate Governance for Listed Companies.
During the reporting period, the Board strived to regulate the operation of the Company by improving its corporate
governance. It improved its corporate governance system in a timely manner and amended and improved the amended
management systems including the Rules of Procedures for General Meetings, the Rules of Procedures for Board Meetings
and the Articles of Association in accordance with the regulatory requirements.
Strict enforcement of relevant internal control systems had promoted a regulated operation and healthy development of the
Company, protecting the legitimate rights and interests of our investors. The overall state of corporate governance was in
compliance with the requirements of the China Securities Regulatory Commission. As the Company’s development strives
forward, its state of regulated operation and internal control will continue to improve.
10 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:24
III Chairman’s Report
III. Dividend Distribution
Consistent with our long-term goal of pursuing the maximisation of corporate values, the Company has always placed
much emphasis on the benefits of and returns to our shareholders. The audited consolidated net profit attributable to
shareholders of the Company for 2017 prepared in accordance with Accounting Standards for Business Enterprises by the
Company amounted to RMB3,769,325,450.93. When deducting the interest for perpetual bonds of RMB153,140,000 and
the dividend of preference shares of RMB333,702,107.35 for 2017, the distributable profit realised for 2017 amounted to
RMB3,282,483,343.58. In accordance with the requirements of the Articles of Association and the Prospectus of Non-public
Issuance of Preference Shares, the proposed profit distribution plan of the Company for 2017 is as follows:
Based on the total ordinary share capital of 1,936,405,467 shares as at the end of 2017 and the 774,526,678 simulated
ordinary shares converted from the preference shares using a conversion ratio of 1 share valued at RMB5.81 as at the
end of 2017, a cash dividend of RMB6 (tax inclusive) per ten shares will be distributed to ordinary shareholders; a cash
dividend of RMB6 (tax inclusive) per ten simulated ordinary shares converted from the preference shares will be distributed
to holders of preference shares; and a capitalisation issue will be made out of the capital reserves of 5 shares for every ten
shares held to ordinary shareholders. A cash dividend of RMB1,161,843,280.20 will be distributed to ordinary shareholders
and a variable cash dividend of RMB464,716,006.88 will be distributed to holders of preference shares. In other words, a
cash dividend of RMB10.33 (tax inclusive) per preference share with a nominal value of RMB100 each will be distributed to
holders of preference shares.
As always, the Company will continue to stay focused on its long-term development and maximise returns for our
shareholders by delivering better results.
IV. Future Development
Benefiting from the continuous stable macroeconomic growth, the development of the paper making industry will maintain
stable growth in the long run. In recently years, the central government has been introducing various industry policies
such as production capacity reduction, the supply-side reform, ten rules regarding water pollution and ten rules regarding
air pollution. Different measures such as setting higher emission standards and strictly restricting corporate size and
structure put stricter restrictions on the enterprises in the paper making industry and force those enterprises with backward
production capacity to actively exit the paper making market. With the continuous introduction of the supply-side reform,
substitution of new production capacity for backward production capacity and other policies, the environmental protection
policies have becoming stricter. The elimination of backward production capacity in the paper making industry has been
progressing smoothly. New production capacity mainly comes from large enterprises. It is expected that the industry
concentration ratio will further increase. The improvement in the supply in the industry has effectively boosted the dual
growth in revenue and profitability of the enterprises in the paper making industry. The downstream demand in the paper
making industry will continue to grow along with the domestic economic growth. The turning point in the supply and
demand structure in the industry has gradually developed with a boom in the industry to be prolonged.
2017 ANNUAL REPORT
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OUTPUT: 27-03-2018 16:29:24
III Chairman’s Report
Since the implementation of the “Thirteenth Five Year Plan”, the accelerated urbanisation and industrialisation in China, the
change in driver of economic growth, upgrade of traditional industries, development of emerging industries, and continuous
infrastructure construction require substantial investment in fixed assets. China will become the largest leasing market in the
world. According to the Research Report on Business Prospects Survey of and Investment Strategies in the China Financial
Leasing Industry 2016-2021 issued by ASKCI Consulting Co. Ltd., the financial leasing industry will grow at a compound
annual growth rate of over 20% in the future and it is expected that the outstanding leasing contracts of the financial leasing
industry in China will amount to RMB20.79 trillion by 2021. The business prospects of the financial leasing industry in China
are promising.
Looking forward, the Company will adhere to the main theme of emphasising on environmental protection, low carbon,
recycling and sustainable development. Following the “Made in China 2025 Plan” and the principles of scientific
development and quality and efficiency enhancement, it will comprehensively improve its quality and efficiency,
management level, technology application, sense of happiness and brand image through the integration between its
production and manufacture segment and financial services segment, incorporation of smart technology into its industrial
activities, further reorganised methodology and restructuring so as to achieve taxable profit over RMB10 billion and strive to
become one of the world-class companies with the highest growth rate during the “Thirteenth Five Year Plan” period.
Chen Hongguo
Chairman
27 March 2018
12 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:24
IV Business Overview
I. Principal operations of the Company during the Reporting Period
Whether the Company needs to comply with the disclosure requirements of specific industries
No
(I) Principal operations of the Company during the Reporting Period
The Company is a large conglomerate principally engaged in paper making, finance, pulp and fibre and mining
businesses while also involved in forestry, logistics, construction materials, and others. The Company is the first
industrial and financing company in the paper making industry having a finance company and a financial leasing
company and also the only listed company with A shares, B shares, H shares and preference shares in issue. The
Company have maintained a leading position among its industry peers for 20 consecutive years in terms of its main
indicators of corporate economic efficiency. The machine-made paper business and the financial leasing business are
main sources of revenue and profit of the Company. During the reporting period, there was no significant change in
the principal operations of the Company.
1. Machine-made paper business
The Company is a leading player in the paper making industry in China. It has established production bases
in Shandong, Guangdong, Hubei, Jiangxi and Jilin with annual pulp and paper production capacity of over
10,000,000 tonnes. Currently, it has the largest integrated forestry, pulp and paper project with the most
advanced technology in the world and dozens of pulp and paper production lines of international advanced
standards. The product mix of the Company has gradually diversified into eight major product series which
focus on high and middle end products, including high-end offset paper, coated paper, white paper board, light
weight coated paper, household paper, electrostatic copy paper, thermal paper and glassine paper.
The Company has scientific research institutions including the national enterprise technology centre, the
postdoctoral working station as well as state certified CNAS pulp and paper testing centre and has obtained
over 150 national patents including 12 patents for invention, with 7 products selected as national new products
and 35 products filling the gap in China. The Company has obtained 21 Science and Technology Progress
Awards above the provincial level and undertaken five national science and technology projects and 26
provincial technological innovation projects. The Company has obtained the ISO9001 quality certification,
ISO14001 environmental protection certification and FSC-COC certification, leading among its industry peers.
2. Financial leasing business
Since its establishment, the Financial Leasing Company, relying on strong capital strength of the Company and
leveraging its excellent business project design ability, strong ability in credit integration and outstanding risk
control capability while giving full play to the advantages of internationalisation and market-oriented operations,
has sustained rapid business development and has been seeking the organic combination between industrial
capital and financial capital. On the basis of serving the upper- and lower-stream of the paper making industry,
it actively provides financing and value-added service solutions to large state-owned enterprises, listed
companies, government financing platforms, quality private enterprises, new and high-tech enterprises, schools
and hospitals, thus greatly promoting the healthy and rapid development of the real economy. The financial
leasing business is mainly conducted on a leaseback basis. Recently, the financial leasing business has become
an integral part of profit of the Company with sound momentum for future growth.
2017 ANNUAL REPORT
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OUTPUT: 27-03-2018 16:29:25
IV Business Overview
I. Principal operations of the Company during the Reporting Period (Cont’d)
(II) General information of the industries where the Company operated in during the reporting period
1. Paper making industry
The paper making industry is an important basic raw materials industry which is closely related to the national
economy and social development. Since 2017, China’s economy extended its development trend at stable
pace, and gradually showed steady growth with favourable momentum. The Thirteenth Five Year Plan imposed
much more stringent environmental protection requirements on the paper making industry. The successive
implementation of environmental protection inspections, licensing system for pollutant discharge and others
reflected that more stringent environmental protection measures will become a prolonged trend in the industry.
Different measures such as setting higher emission standards and strictly restricting corporate size and structure
put stricter restrictions on the enterprises in the paper making industry and forced those enterprises with
backward production capacity to actively exit the paper making market. The large leading enterprises having
comprehensive environmental facilities with significant economies of scale became the actual beneficiaries
under these environmental protection policies.
Policies such as production capacity reduction and the supply-side reform were continuously introduced.
The environmental protection policies continued to become stricter. The elimination of backward production
capacity in the paper making industry progressed smoothly. New production capacity mainly came from large
enterprises. The situation will bring about both commercial and development opportunities for some enterprises
while facilitating an industry reshuffle to deepen the industry concentration, and therefore the industry will
continue to prosper. The prices of paper products increase due to the increased costs of, among other things,
wood pulp, waste paper and logistics. The leading enterprises maintain their cost advantage with their pulp
inventories and their own pulp production capacity and improve their profitability with a boom in the industry to
be prolonged.
The Company is a leading player in the paper making industry of China and is ranked among the top ten paper
manufacturers in the world with an annual pulp and paper production capacity of over 10 million tonnes. The
Company have maintained a leading position among its industry peers for 20 consecutive years in terms of
its main indicators of corporate economic efficiency. Therefore, the Company enjoyed significant economies
of scale in the industry and was relatively favourably positioned for its future development. As the first listed
company with A shares, B shares, H shares and preference shares in issue in China, the Company had gained
access to the capital market, thus providing effective support for the future project investments of the Company.
The overall listing of the machine-made paper business of the Company also made the management of the
Company more regulated and the operations more transparent, thus laying a solid foundation for the sustainable
development of the Company.
14 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:25
IV Business Overview
I. Principal operations of the Company during the Reporting Period (Cont’d)
(II) General information of the industries where the Company operated in during the reporting period
(Cont’d)
2. Financial leasing industry
The Guiding Opinions on Accelerating the Development of Financial Leasing Industry and the Guiding Opinions
on Promoting the Sound Development of Financial Leasing Industry were issued by the State Council in 2015.
As the first national policy on promoting the financial leasing industry in China, the above opinions had paved
the way for the development of the financial leasing industry in the future.
Under the new normal of the economic development, the financial leasing industry in China entered its golden
years. According to the statistics of China Leasing Alliance and Tianjin Binhai Financial Leasing Research
Institute, there were about 9,090 enterprises engaging in financial leasing in China, representing a year-on-
year increase of approximately 1,954, as at the end of the 2017. The outstanding financial leasing contracts
amounted to RMB6.06 trillion, representing a year-on-year increase of approximately 13.70%. According to the
Research Report on Business Prospects Survey of and Investment Strategies in the China Financial Leasing
Industry 2016-2021 issued by ASKCI Consulting Co., Ltd., the financial leasing industry will grow at a compound
annual growth rate of over 20% in the future and it is expected that the output of the industry will amount to
RMB20.79 trillion by 2021. The business prospects of the financial leasing industry in China are promising.
II. Material Changes of Major Assets
1. Material Changes of Major Assets
Major assets Description
Equity The Company principally had new equity investments in Ningbo Kaichen Huamei
and Weifang Sime Darby West Port during the reporting period.
Investment property The Company disposed of its properties at Digital Building in Beijing and made
an investment in investment property at Pujiang International Financial Plaza in
Shanghai during the reporting period.
Fixed assets The Company had the new fixed assets at Pujiang International Financial Plaza
in Shanghai for its own use during the reporting period.
Construction in progress Continued investment was made in the Shouguang Meilun chemical pulp
project, the 510,000 tonne high-end cultural paper project and the Huanggang
pulp and paper project, and investment was made in the newsprint paper-for-
cultural paper project during the reporting period.
2. Major Assets Overseas
Applicable √ Not applicable
2017 ANNUAL REPORT
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OUTPUT: 27-03-2018 16:29:25
IV Business Overview
III. Analysis of Core Competitiveness
Whether the Company needs to comply with the disclosure requirements of specific industries
No
The Company is a leading player in the paper making industry of China. After innovation and development for more than
half a century, it has developed into a large conglomerate principally engaged in paper making, finance, pulp and fibre
and mining businesses while also involved in forestry, logistics, construction materials, and others. It is also the only listed
company with A shares, B shares and H shares and preference shares in issue in China and the first company in the paper
making industry having a finance company and a financial leasing company integrated with its industrial activities in China.
Compared with other enterprises in the industry, the Company has the following advantages:
1. Scale advantages
After years of development, the Company, being a leading player in the paper making industry in China, has achieved
annual pulp and paper production capacity of over 10 million tonnes and is capable to compete with international
paper making enterprises in scale. The large-scale centralised production and operation model has provided
the Company with obvious economic benefits. The Company also has strong market influence over raw material
procurement, product pricing and industry policymaking.
2. Product advantages
While the production scale of the Company is expanding rapidly, its product mix also continues to optimise. In recent
years, the Company has built production lines for cultural paper such as high-end coated paper, high-end food
packaging paper and high-end white paper board. The product mix of the Company has gradually diversified into
eight major product series which focus on high and middle end products, including high-end offset paper, coated
paper, white paper board, light weight coated paper, household paper, electrostatic copy paper, thermal paper and
glassine paper. Thus, the Company has become the enterprise that offers the widest product range in China’s paper
making industry. Diversification and gentrification of the product mix has not only greatly enhanced the Company’s
ability to withstand market risks, but also enabled the Company to maintain a relatively high profitability.
3. Advantages in technical equipment
Currently, the Company has the largest integrated forestry, pulp and paper project with the most advanced technology
in the world and dozens of pulp and paper production lines of international advanced standards. The Company’s
overall technical equipment has reached the advanced international level. The major production equipment has been
imported from internationally renowned manufacturers, including Valmet, Ahlstrom and Metso of Finland, Voith of
Germany and TBC of the United States.
The technical equipment used by the Company generally reflects the characteristics of being technology-intensive
and the integration of mechanical and electrical in the paper making industry nowadays. The degassing technology,
wet end chemical technology, intelligent sheet lateral control technology, coating preparation technology, free-jet
coating technology, multi-nip pressure balanced calender technology and the technical processes independently
developed by the Company of the pulp systems have all reached the international advanced level.
16 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:25
IV Business Overview
III. Analysis of Core Competitiveness (Cont’d)
4. Advantages in research and innovation and new product development
The Company is a high and new-technology enterprise and gives full play to its strong research capability. Supported
by the national enterprise technology centre and the post-doctoral working station, the Company has established
a comprehensive intellectual property system and put more and more efforts in technical innovation and scientific
research and development to develop new products with high technology contents and high added value as well
as proprietary technologies. Meanwhile, the technology centre of the Company has actively engaged in technical
cooperation with schools, research institutions and international advanced enterprises. The Company has obtained
over 150 national patents including 12 patents for invention, with 7 products selected as national new products
and 35 products filling the gap in China. The Company participated in the formulation of 4 national standards and
was awarded honours including “China Patent Shandong Star Enterprise”, becoming the “green engine” of the
transformation and upgrading in the paper making industry and leading the direction of the latest and most advanced
technology in the paper making industry in China.
5. Funding advantages
The paper making industry is a capital-intensive industry, and funding is one of the most important factors in the
development of the industry. The Company has high profitability and credit status, and has maintained long-term
stable cooperative relations with its bankers, which provide the Company with an unobstructed indirect financing
capacity. Since its listing, the Company has maintained good operating results and a sound corporate governance
structure. It has conducted several financing activities in domestic and foreign capital markets. As the funds obtained
have been applied effectively with good market image, the Company has stronger abilities in direct financing in the
capital market.
6. Team advantages
The key management members and the core personnel of the Company remain stable. In the business development
of Chenming Paper, an internal corporate culture developed by the stable core staff team favourable to the growth of
the Company consolidates the management experience specific to the industry, thus resulting in a team advantage
blended with management and culture. Meanwhile, the Company has attracted experienced professionals with
financial, legal, financial management backgrounds through its advanced management philosophy and ample room
for development. The high quality and professional team secures the sustainable development of the Company with a
solid supply of talents.
7. Advantages in environmental governance capacity
In recent years, the Company and its subsidiaries have constructed the pollution treatment facilities including the
alkali recovery system, middle water treatment system, white water recovery system and black liquor comprehensive
utilisation system. The environmental emission indicators of the Company rank high among industry peers. Besides,
the national policy of eliminating obsolete production capacity will facilitate the development of the paper making
industry while the replenishment and replacement of advanced production capacity will bring new blood and
momentum into the paper making industry, favouring industry concentration to establish a sound industry cycle.
2017 ANNUAL REPORT
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OUTPUT: 27-03-2018 16:29:25
V Discussion and Analysis of Operations
I. Overview
In 2017, facing the complex macroeconomic conditions, as well as the pressure from the market, environmental protection
and increasing costs, the Company, aiming at “developing into an enterprise with hundreds of billions in value and forging
Chenming into a centennial brand”, committed itself to “team building, management enhancement, outstanding business
performance and good results” to strive for progress and be innovative and practical, and comprehensively improved its
quality and efficiency, management level, technology application, sense of happiness and brand image. It successfully
completed all the work targets for the year and achieved very impressive results.
In 2017, the Company completed the production of machine-made paper of 5.10 million tonnes with sales of 4.96 million
tonnes and achieved revenue of RMB29.852 billion, a year-on-year increase of 30.32%. The Company recorded operating
costs of RMB19.729 billion, a year-on-year increase of 24.97%. Total profit and net profit attributable to equity holders of
the Company were RMB4,536 million and RMB3,769 million respectively, up by 75.62% and 88.60% from the prior year.
The Company’s total assets amounted to RMB105.625 billion. The financial segment experienced stable development
across businesses with ever improving management systems and effective risk preventions.
(I) New breakthroughs in operation management
Facing the complex and ever-changing market conditions, the sales system persistently executed the decision
and planning made by the management of the Company in spite of challenges with a pioneering attitude, thus
opening up an unprecedented new era. By adopting measures such as strengthening business training, enhancing
appraisal methods and incentive measures, focusing on performance and caring for employees’ living, the sales team
significantly improved its capability with refreshed spirits. Under strengthened market operations and the regulated
market order, the marking strategies were useful and highly effective. The market construction was steadily enhanced
through strengthened management on accounts receivable and channel construction.
(II) New progress in production management
Benefiting from the strengthened basic management, the progress made in team building and improved operation
skills of employees, the production system was stable and under control and continued to perform well as a whole.
The machines were under stable and efficient operation during the year through strengthened management, control
and appraisal. The Company also conducted production capacity enhancement in its own pulp production, adjusted
product structure, focused on the development of products with high efficiency, optimised techniques and promoted
the application of new technologies and raw materials to improve efficiency.
18 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
I. Overview (Cont’d)
(III) Stable operation in the financial segment
For the financial segment, the Company constructed a financial business system with a more reasonable structure
through active business expansion and strict risk control. In order to strengthen the centralised management of its
financial business, the Company set up the headquarters for the management of financial leasing and also established
two financial leasing companies in Shanghai and Guangzhou, and two commercial factoring companies in Shandong
and Guangzhou to further mitigate business risks and improve internal management and profitability. By issuing
perpetual bonds of RMB3.0 billion and corporate bonds of RMB1.2 billion, the Company reduced its gearing ratio and
improved its debt structure. The Company also stepped up efforts in cooperation between banks and enterprises by
reaching a strategic cooperation with Qilu Bank and expanding the scope of cooperation with Industrial Bank, Postal
Savings Bank and other banks, and obtained additional credit facilities of over RMB18.0 billion.
(IV) Flourishing project construction in full swing
The phase I of the magnesite mining project of Haiming Mining commenced operation in January 2018. The
400,000-tonne chemical pulp project and 510,000 tonne high-end culture paper project of Shouguang Meilun and
the 300,000 tonne wood pulp project of Huanggang Chenming progressed smoothly according to the schedule. After
being put into production, these projects will play a very important role in enhancing the sustainable development and
achieving the strategic objectives of the Company.
(V) Effective corporate management
The Company fully implemented the adjustments in the organisational structure and the remuneration system as
planned to further enhance the functional management as well as the effectiveness of remuneration as incentives. The
Company promoted reform on management and system upgrade through the construction of process and information
technology. The Company also further improved its management system to keep track of the basic management. By
focusing on strengthening level management, formulating management measures and specifying management duties,
the capabilities of discovering and solving problems at all levels were enhanced with stronger team execution. The
Company motivated its team by enhancing remuneration and incentives and providing more positive incentives, thus
significantly improving the enthusiasm and creativity of its management personnel.
2017 ANNUAL REPORT
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OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
II. Analysis of principal operations
1. Overview
Please see “I. Overview” under “Discussion and Analysis of Operations” for relevant information.
2. Revenue and cost
(1) Components of revenue
Unit: RMB
2017 2016 Increase/
Amount % of revenue Amount % of revenue decrease
Total revenue 29,851,743,848.13 100% 22,907,118,241.84 100% 30.32%
By industry
Machine-made paper 26,280,449,337.82 88.04% 19,536,639,601.47 85.29% 34.52%
Financial leasing 2,347,173,531.64 7.86% 2,339,925,682.07 10.21% 0.31%
Electricity and steam 198,073,854.15 0.66% 338,702,429.21 1.48% -41.52%
Construction materials 255,747,205.45 0.86% 227,629,265.80 0.99% 12.35%
Chemicals 109,914,856.68 0.37% 129,003,963.48 0.56% -14.80%
Hotel 24,368,815.97 0.08% 26,677,286.19 0.12% -8.65%
Others 636,016,246.42 2.13% 308,540,013.62 1.35% 106.14%
By product
Duplex press paper 6,368,897,144.23 21.34% 4,966,155,905.70 21.68% 28.25%
Coated paper 5,489,860,030.01 18.39% 4,428,162,301.09 19.33% 23.98%
White paper board 6,906,078,714.80 23.13% 2,815,701,912.71 12.29% 145.27%
Electrostatic paper 2,371,439,780.86 7.94% 2,107,489,078.57 9.20% 12.52%
Anti-sticking raw paper 1,207,953,706.05 4.05% 1,009,523,792.88 4.41% 19.66%
Newsprint paper 793,309,261.25 2.66% 996,218,028.98 4.35% -20.37%
Household paper 689,570,026.52 2.31% 659,518,362.24 2.88% 4.56%
Light weight coated paper 515,092,105.82 1.73% 463,577,121.66 2.02% 11.11%
Writing paper 275,304,569.70 0.92% 274,469,632.58 1.20% 0.30%
Other machine-made paper 1,662,943,998.58 5.57% 1,815,823,465.06 7.93% -8.42%
Financial leasing 2,347,173,531.64 7.86% 2,339,925,682.07 10.21% 0.31%
Electricity and steam 198,073,854.15 0.66% 338,702,429.21 1.48% -41.52%
Construction materials 255,747,205.45 0.86% 227,629,265.80 0.99% 12.35%
Chemicals 109,914,856.68 0.37% 129,003,963.48 0.56% -14.80%
Hotel 24,368,815.97 0.08% 26,677,286.19 0.12% -8.65%
Others 636,016,246.42 2.13% 308,540,013.62 1.35% 106.14%
By geographical segment
Mainland China 25,920,834,960.98 86.83% 19,628,612,055.93 85.69% 32.06%
Other countries and regions 3,930,908,887.15 13.17% 3,278,506,185.91 14.31% 19.90%
20 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(2) Industries, products or regions accounting for over 10% of revenue or operating profit of the Company
√ Applicable Not applicable
Whether the Company needs to comply with the disclosure requirements of specific industries
No
Unit: RMB
Increase/decrease Increase/decrease of
Increase/decrease of of operating costs gross profit margin
revenue as compared as compared to the as compared to the
to the corresponding corresponding period corresponding period
Revenue Operating costs Gross profit margin period of the prior year of the prior year of the prior year
By industry
Machine-made paper 26,280,449,337.82 18,620,269,325.34 29.15% 34.52% 25.03% 5.38%
Financial leasing 2,376,560,324.10 282,366,339.02 88.12% 1.57% 28.67% -2.50%
By product
Duplex press paper 6,368,897,144.23 4,681,114,971.82 26.50% 28.25% 25.85% 1.40%
Coated paper 5,489,860,030.01 3,806,504,813.36 30.66% 23.98% 15.77% 4.91%
White paper board 6,906,078,714.80 4,769,506,903.63 30.94% 145.27% 124.22% 6.49%
Electrostatic paper 2,371,439,780.86 1,503,657,404.54 36.59% 12.52% 8.70% 2.23%
Anti-sticking
raw paper 1,207,953,706.05 795,913,212.90 34.11% 19.66% 11.05% 5.10%
Financial leasing 2,376,560,324.10 282,366,339.02 88.12% 1.57% 28.67% -2.50%
By geographical segment
Mainland China 25,920,834,960.98 16,111,178,123.56 37.84% 59.43% 34.15% 11.71%
Other countries
and regions 3,930,908,887.15 3,618,012,351.53 7.96% 19.90% 25.47% -4.09%
Under the circumstances that the statistics specification for the Company’s principal operations data
experienced adjustment in the reporting period, the principal operations data upon adjustment of the statistics
specification at the end of the reporting period in the latest year
Applicable √ Not applicable
2017 ANNUAL REPORT
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OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(3) Whether revenue from sales in kind is higher than revenue from services
√ Yes No
Increase/
By industry Item Unit 2017 2016 decrease
Machine-made paper Sales ’0,000 tonnes 496 452 9.73%
Production output ’0,000 tonnes 510 436 16.97%
Inventories ’0,000 tonnes 47 33 42.42%
Explanation on why the related data varied by more than 30%
√ Applicable Not applicable
The inventories of machine-made paper increased by 42.42% year on year mainly due to the production
capacity increase after the operation of the Zhanjiang 600,000-tonne liquid packaging paper project.
(4) Performance of material sales contracts of the Company during the reporting period
Applicable √ Not applicable
22 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(5) Composition of operating costs
By industry
Unit: RMB
2017 2016 Increase/
By industry Item Amount % of operating costs Amount % of operating costs decrease
Machine-made paper Raw materials 11,321,010,554.29 60.80% 8,974,526,123.35 60.26% 26.15%
Depreciation 875,140,104.87 4.70% 768,639,922.25 5.16% 13.86%
Labour costs 259,402,371.05 1.40% 186,978,418.54 1.26% 38.73%
Energy and power 2,041,148,096.91 11.00% 1,526,753,692.29 10.25% 33.69%
Chemicals 2,649,089,266.03 14.20% 2,014,239,925.46 13.52% 31.52%
Other production costs 1,474,478,932.18 7.90% 1,421,923,493.98 9.55% 3.70%
Subtotal 18,620,269,325.34 100.00% 14,893,061,575.87 100.00% 25.03%
Power and steam Raw materials 106,044,022.66 80.20% 161,521,323.47 75.37% -34.35%
Depreciation 9,800,393.22 7.40% 19,858,908.35 9.27% -50.65%
Labour costs 3,756,021.82 2.80% 7,643,082.12 3.57% -50.86%
Energy and power 2,850,799.43 2.20% 2,769,566.68 1.29% 2.93%
Chemicals 345,197.70 0.30% 697,230.84 0.33% -50.49%
Other production costs 9,400,888.63 7.10% 21,811,402.07 10.18% -56.90%
Subtotal 132,197,323.45 100.00% 214,301,513.53 100.00% -38.31%
Construction materials Raw materials 151,042,972.58 72.70% 116,872,767.63 67.09% 29.24%
Depreciation 7,247,023.47 3.50% 4,589,639.45 2.63% 57.90%
Labour costs 14,112,147.05 6.80% 11,218,728.30 6.44% 25.79%
Energy and power 23,009,884.02 11.10% 22,500,486.99 12.92% 2.26%
Other production costs 12,319,837.64 5.90% 19,011,859.48 10.91% -35.20%
Subtotal 207,731,864.76 100.00% 174,193,481.85 100.00% 19.25%
2017 ANNUAL REPORT 23
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OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(6) Change of scope of consolidation during the reporting period
√ Yes No
Business combination not under common control
Revenue of Net profit of
acquiree from acquiree from
Equity Equity the acquisition the acquisition
Point of time of acquisition acquisition Equity Acquisition Basis for the date to the end of date to the end of
Name of acquiree equity acquisition costs (RMB’0000) proportion (%) acquisition mode date acquisition date the period (RMB) the period (RMB)
Shanghai Hongtai Real October 2017 159,064.67 45.00 Merger 2017.11.1 Date of substantive 485,784.40 -36,856,878.73
Estate Co., Ltd. and acquisition control
Change in scope of consolidation due to other reasons
During the year, the scope of consolidation included 9 newly established subsidiaries, namely Shanghai
Chenming Industry Co., Ltd., Shanghai Chenming Financial Leasing Co., Ltd., Guangzhou Chenming
Financial Leasing Co., Ltd., Shandong Chenming Commercial Factoring Co., Ltd., Guangzhou Chenming
Commercial Factoring Co., Ltd., Qingdao Chenming Pulp and Paper Electronic Commodity Exchange
Co., Ltd., Xuchang Chenming Paper Co., Ltd., Chengdu Chenming Culture Communication Co., Ltd. and
Beijing Chenming Culture Communication Co., Ltd.
During the year, the scope of consolidation excluded 2 companies: a former subsidiary, namely
Shouguang Chenming Hongxin Packaging Co., Ltd was deregistered upon merger and acquisition by
another subsidiary Shouguang Hongxiang Printing and Packaging Co., Ltd, whereas Jilin Chenming
Machinery Manufacturing Co., Limited was transferred.
(7) Significant change in or adjustment of the businesses, products or services of the Company during the
reporting period
Applicable √ Not applicable
24 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
2. Revenue and cost (Cont’d)
(8) Sales to major customers and major suppliers
Sales to major customers of the Company
Total sales to top 5 customers (RMB) 1,948,080,321.71
Total sales to top 5 customers as a percentage of the total sales for the year 6.53%
Sales to top 5 customers who are related parties
as a percentage of the total sales for the year 0.00%
Information on top 5 customers of the Company
As a percentage
of the total sales
No. Name of customer Sales (RMB) for the year (%)
1 Customer A 520,359,524.99 1.74%
2 Customer B 397,167,618.02 1.33%
3 Customer C 375,786,051.33 1.26%
4 Customer D 342,484,499.61 1.15%
5 Customer E 312,282,627.76 1.05%
Total — 1,948,080,321.71 6.53%
Other explanation of major customers
Applicable √ Not applicable
Major suppliers of the Company
Total purchases from top 5 suppliers (RMB) 4,905,829,110.64
Total purchases from top 5 suppliers as a percentage of the total purchases for the year 24.87%
Total purchases from top 5 suppliers who are related parties as a percentage
of the total purchases for the year 0.00%
Information on top 5 suppliers of the Company
As a percentage of
the total purchases
No. Name of supplier Purchases (RMB) for the year (%)
1 Supplier A 1,199,824,640.13 6.08%
2 Supplier B 1,191,365,504.15 6.04%
3 Supplier C 1,029,110,865.91 5.22%
4 Supplier D 867,095,512.68 4.39%
5 Supplier E 618,432,587.77 3.13%
Total — 4,905,829,110.64 24.86%
Other explanation of major suppliers
Applicable √ Not applicable
2017 ANNUAL REPORT 25
3704827-t01fnar (Shandong Chenming) p.25 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
3. Expenses
Unit: RMB
Increase/
2017 2016 decrease (%) Reasons for material changes
Selling and distribution 1,304,465,552.27 1,166,484,567.20 11.83% Mainly due to the increase of
expenses transportation expenses resulting
from higher sales
General and 1,909,369,899.86 1,441,458,586.06 32.46% Mainly due to an increase in research
administrative and development expenditure and
expenses employee’s compensation
Finance expenses 2,496,592,415.87 1,818,564,890.78 37.28% Mainly due to an increase in interest
expenses and exchange loss
Loss on impairment 141,361,141.80 413,711,106.31 -65.83% Mainly due to impairment of assets
of asset incurred by Fuyu Chenming and
Jiangxi Chenming during the
corresponding period of the prior
year
26 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3704827-t01fnar (Shandong Chenming) p.26 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
4. Research and development expenditure
√ Applicable Not applicable
The Company had been closely following the economic and market conditions in China and in the industry since
2017. Driven by customers’ demand and targeting at enhancing economic benefits, the Company put more efforts
into technical innovation, promoted the application of new technology and new raw materials such as enzymes
for pulping and filler modification enhancers, and developed new products with high technology contents and
high economic benefits, striving to conduct R&D on product differentiation and refining. Six R&D projects such as
“technical development of light weight colour duplex press paper”, “technical development of low ink absorption
one-side coated paper”, “technical development of copy raw paper for construction” and “technical development of
oxidised starch for glassine paper”, were listed on the technological innovative project plans of Shandong Province
for 2017. The Company was awarded the second tier prize of the Science and Technology Progress Awards of the
Ministry of Education in 2017 for its “Key Technology and Application of Water Saving and Clean Production in Paper
Making” under collaborative development with Nanjing Forestry University on production, learning and research in
the water saving and clean production area in paper making. Meanwhile, the Company completed the development
and upgrade of high value-added products such as micro coated paper, exquisite duplex press paper and white
solid bleached board, thereby accelerating the adjustment in product structure and facilitating transformation and
upgrading after industrial application.
Research and development expenditure of the Company
2017 2016 Percentage change
R&D headcount 1,434 1,161 23.51%
Ratio of R&D personnel 10.56% 8.94% 1.62%
R&D expenditure (RMB) 1,017,306,281.19 735,689,011.01 38.28%
R&D expenditure to revenue 3.41% 3.21% 0.20%
Reasons for significant change in total R&D expenditure to revenue
Applicable √ Not applicable
2017 ANNUAL REPORT
3704827-t01fnar (Shandong Chenming) p.27 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
II. Analysis of principal operations (Cont’d)
5. Cash flows
Unit: RMB
Increase/
decrease
Item 2017 2016 (%)
Subtotal of cash inflows from operating activities 25,185,850,961.77 23,640,327,789.01 6.54%
Subtotal of cash outflows from operating activities 25,162,084,918.84 21,487,278,519.17 17.10%
Net cash flows from operating activities 23,766,042.93 2,153,049,269.84 -98.90%
Subtotal of cash inflows from investing activities 1,018,367,966.90 660,100,177.22 54.27%
Subtotal of cash outflows from investing activities 4,649,220,322.66 4,327,554,352.96 7.43%
Net cash flows from investing activities -3,630,852,355.76 -3,667,454,175.74 1.00%
Subtotal of cash inflows from financing activities 66,918,619,679.44 59,667,079,610.56 12.15%
Subtotal of cash outflows from financing activities 62,441,482,879.29 58,037,514,000.21 7.59%
Net cash flows from financing activities 4,477,136,800.15 1,629,565,610.35 174.74%
Net increase in cash and cash equivalents 824,547,328.84 91,753,551.86 798.65%
Explanation on main effects of material changes
√ Applicable Not applicable
(1) Net cash flows from operating activities decreased by 98.90% as compared to the corresponding period of the
prior year mainly due to the external business growth of the financial leasing business.
(2) Net cash flows from financing activities increased by 174.74% as compared to the corresponding period of the
prior year mainly due to the increase in borrowings during the year.
Explanation on main reasons leading to the material difference between net cash flows from operating activities during
the reporting period and net profit for the year
√ Applicable Not applicable
The main reasons were the increase in amounts receivable of the Company settled through bills during the reporting
period and the external business growth of the financing leasing business.
III. Analysis of non-principal operations
Applicable √ Not applicable
28 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3704827-t01fnar (Shandong Chenming) p.28 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
IV. Assets and liabilities
1. Material changes of asset items
Unit: RMB
As at the end of 2017 As at the end of 2016
As a percentage of As a percentage of
Amount total assets Amount total assets Percentage change Description of major changes
Monetary funds 14,443,492,461.43 13.67% 10,109,930,319.49 12.29% 1.38% Mainly due to the increase of the sales revenue
Accounts receivable 3,665,865,577.03 3.47% 3,974,065,104.15 4.83% -1.36% —
Inventories 6,022,805,491.17 5.70% 4,862,668,746.90 5.91% -0.21% Mainly due to the increase of inventories of raw materials and
finished goods as the production capacity of the Company
increased
Investment properties 4,809,535,109.82 4.55% 14,258,675.83 0.02% 4.53% Mainly due to the inclusion of Shanghai Hongtai in the scope
of consolidation
Long-term equity investments 391,868,827.45 0.37% 67,251,992.88 0.08% 0.29% Mainly due to the new equity investments made in Kaichen
Huamei and Sime Darby West Port during the reporting period
Fixed assets 28,227,509,503.05 26.72% 28,811,555,365.39 35.01% -8.29% —
Construction in progress 7,668,669,413.87 7.26% 4,115,194,870.23 5.00% 2.26% Mainly due to the continued investment in the Meilun chemical
pulp project, the 510,000 tons of cultural paper project and the
Huanggang pulp and paper project
Short-term borrowings 35,096,574,873.03 33.23% 27,875,506,988.53 33.88% -0.65% Mainly due to the increase of the short-term liquidity demand
from the expanded production scale
Long-term borrowings 7,646,122,995.91 7.24% 6,935,598,781.23 8.43% -1.19% —
Bills receivable 4,220,231,853.56 4.00% 1,590,460,875.23 1.93% 2.07% Mainly due to the increase of the bills and letters of credit and
the increase of the bills pledged for loans
Prepayments 1,962,151,473.35 1.86% 1,511,362,674.64 1.84% 0.02% Mainly due to the increase of the prepayments for raw
materials of the Company
Other receivables 538,734,656.55 0.51% 1,614,214,645.49 1.96% -1.45% Mainly due to the recovery of the financial support granted
to Wuhan Chenming Wanxing Real Estate Co. Ltd by the
Company
Non-current assets due 6,901,695,875.94 6.53% 5,487,376,588.22 6.67% -0.14% Mainly due to the increase of amounts receivable due within
within one year one year of the long-term financing leasing business of the
Company
Other current assets 11,568,757,330.26 10.95% 6,616,744,831.28 8.04% 2.91% Mainly due to the increase of receivables under financial lease
due within one year of the Company
Intangible assets 2,059,221,379.09 1.95% 1,540,959,330.74 1.87% 0.08% Mainly due to the increase of the land use rights of Huanggang
Chenming and Haiming Mining
Bills payable 1,278,395,090.71 1.21% 515,301,703.08 0.63% 0.58% Mainly due to the increase of the payment for goods settled by
bills by the Company
Advance receipts 243,182,891.22 0.23% 377,135,566.33 0.46% -0.23% Mainly due to the decrease of advance receipts received by
the Company
Other receivables 1,426,629,545.41 1.35% 948,919,195.81 1.15% 0.20% Mainly due to the increase of the deposits received by the
Company during the reporting period
Non-current liabilities 3,625,430,347.40 3.43% 6,237,021,557.17 7.58% -4.15% Mainly due to the repayment of the matured corporate bonds
due within one year of RMB3.8 billion
Other current liabilities 10,797,248,631.76 10.22% 6,602,863,069.45 8.02% 2.20% Mainly due to the increase of the short-term and ultra-short-
term commercial paper by the Company at the end of this year
Long-term payables 5,550,881,435.64 5.26% 3,951,368,854.00 4.80% 0.46% Mainly due to the proceeds from the financing leasing
business by the Company during the reporting period
2017 ANNUAL REPORT
3704827-t01fnar (Shandong Chenming) p.29 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
IV. Assets and liabilities (Cont’d)
2. Assets and liabilities measured at fair value
√ Applicable Not applicable
Unit: RMB
Profit or loss
from change in Cumulative Impairment
fair value during fair value change provided during Purchases Disposal during
Item Opening balance the period charged to equity the period during the period the period Closing balance
Financial assets
1.financial assets measured at fair
value with changes carried
through profit or loss 94,000,000.00 94,000,000.00 94,000,000.00
Consumable biological assets 1,633,513,994.28 -21,000,042.33 99,474,798.31 170,118,925.16 26,256,923.04 1,756,375,954.07
Total 1,633,513,994.28 72,999,957.67 193,474,798.31 0.00 170,118,925.16 26,256,923.04 1,850,375,954.07
Financial liabilities 0.00 0.00
Whether there were any material changes on the measurement attributes of major assets of the Company during the
reporting period
Yes √ No
3. Restriction on asset rights as at the end of the reporting period
Unit: RMB
Carrying amount as
Item at the end of the year Reasons for such restriction
Monetary funds 11,639,084,086.97 As deposits for bank acceptance bills, letters of credit and bank
borrowings, and deposit reserves
Bills receivable 2,108,159,820.71 As collateral for short-term borrowings, bills payable, letters of
guarantee and letters of credit
Investment properties 4,809,535,109.82 As collateral for bank borrowings
Fixed assets 5,663,286,231.38 As collateral for bank borrowings and long-term payables
Intangible assets 597,992,087.19 As collateral for bank borrowings and long-term payables
Total 24,818,057,336.07
V. Investments
1. Overview
√ Applicable Not applicable
Investments during
Investments during the the corresponding period of
reporting period (RMB) prior year (RMB) Change
10,071,391,422.52 4,603,144,781.24 118.79%
30 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
V. Investments (Cont’d)
2. Material equity investments during the reporting period
√ Applicable Not applicable
Unit: RMB
Progress as Profit or l ss Lawsuit Date of
Form of Investment Period of at the date of Estimated from i vestment i i volved disclosure
Name of i vestee Principal activ t es i vestment amount Sharehold ng Source of fund Partner(s) i vestment Product type balance sheet return for the period or not (if any) Disclosure i dex (if any)
Shanghai Chenming Industria i vestment, commercia Newly 1,000,000,000.00 100.00% Self-owned A whol y-owned subsid ary 15 September 2017 Enterprise i vestment Completed — -6,832,513.72 No 26 September http://www.cninfo.com.cn
Industry Co., Ltd. consultation and property establ shed funds to etc.
management 14 September 2037
Shanghai Chenming Financia l asing and operating Newly 0.00 100.00% Self-owned A whol y-owned subsid ary 6 November 2017 Financia l asing Not completed — 0.00 No 26 September http://www.cninfo.com.cn
Financia Leasing Co., Ltd. l asing establ shed funds to
5 November 2047
Shouguang Chenming Import Import and export of goods and Capital 150,000,000.00 100.00% Self-owned A whol y-owned subsid ary 30 December 2011 Import and export Completed — 2,389,702.11 No 14 October 2017 http://www.cninfo.com.cn
and Export Trade Co., Ltd. technologies within the scope as i crease funds to trade
permitted by the State 30 December 2031
Shandong Chenming Business as permitted by the Capital 1,000,000,000.00 100.00% Self-owned A whol y-owned subsid ary Long-term Corporate financia Completed — 200,067,991.63 No 14 October 2017 http://www.cninfo.com.cn
Group Finance Co., Ltd. China Banking Regulatory i crease funds business
Commission pursuant to relevant
l ws, admin strative regulations
and other regulations
Shanghai Hongtai Real Real estate development Acquis t on 1,590,646,717.76 45.00% Self-owned Guangdong Dejun Investment 31 January 1994 Real estate Completed — -36,856,878.73 No 31 October 2017 http://www.cninfo.com.cn
Estate Co., Ltd. and operation and property funds Management Co., Ltd. and to
management Shanghai Xinhuangpu Real 30 January 2044
Estate Co., Ltd.
Guangzhou Chenming Financia l asing Newly 465,779,506.00 100.00% Self-owned A whol y-owned subsid ary17 November 2017 Financia l asing Completed — 98,465.85 No 16 November http://www.cninfo.com.cn
Financia Leasing Co., Ltd. establ shed funds to
16 November 2047
Guangzhou Chenming Commercia factoring Newly 51,000,000.00 51.00% Self-owned Weifang Haiyue Corporate Long-term Commercia factoring Completed — 404.34 No 16 November http://www.cninfo.com.cn/
Commercia establ shed funds Management Co., Ltd.
Factoring Co., Ltd.
Ningbo Kaichen Huamei Private equity i vestment Newly 200,000,000.00 40.00% Self-owned Zhuhai Kaichenxing Long-term Equity i vestment Completed — -1,018,826.99 No 16 August 2017 http://www.cninfo.com.cn/
Equity Investment establ shed funds Investment Advisory
Fund Partnership Company (General
(Lim ted Partnership) Partnership), Bei i g Taihe
Orient Investment Co.,
Ltd., Tibet Guangqi Venture
Capital Management Co.,
Ltd., Shenzhen Pengchong
Investment Management Co.,
Ltd., Wang Chengj ang, Yu
Xiaoj e and Sui Xinpeng
Weifang Sendamei West Port Engaged i port construction, Acquis t on 106,110,000.00 50.00% Self-owned Sendamei Overseas (Hong Long-term Port Completed — -1,325,077.59 No — Not appl cable
Co. Ltd. management and operation funds Kong) l m ted.
Shandong Chenming Relevant consultation services Newly 150,000,000.00 100.00% Self-owned A whol y-owned subsid ary Long-term Commercia factor Completed — 843,198.40 No Not appl cable
Commercia for domestic factoring, export establ shed funds
Factoring Co., Ltd. factoring and commercia
factoring; corporate management
consultation; and asset valuation
services
Xuchang Chenmig Paper Paper pulp, fin shed paper, paper Newly 60,000,000.00 60.00% Self-owned A hold ng subsid ary Long-term Machine-made paper Completed — -17,007,455.36 No Not appl cable Not appl cable
Co. Ltd. products, packaging production, establ shed funds
sales.
Zhanj ang Chenming Production and sales of Capital 2,000,000,000.00 100.00% Self-owned A subsid ary Long-term electrostatic paper, Completed — 1,684,736,236.73 No 17 November http://www.cninfo.com.cn/
Pulp & Paper Co. Ltd. electrostatic paper, duplex press i crease funds duplex press paper,
paper and white paper board; and white paper board,
production and sales of pulp etc.
Qingdao Chenming Nonghai Conducting spot transactions, Capital 3,297,855,218.76 100.00% Self-owned A whol y-owned subsid ary Long-term Financia l asing Completed — 196,608,697.71 No 31 March 2016 http://www.cninfo.com.cn/
Financia Leasing Co., Ltd. trading of and electronic i crease funds
commerce of pulp, fin shed paper
products, paper-making auxi i ry
materia s, etc., and onl ne sale of
pulp, paper, paper product, etc.
Total — — 10,071,391,442.52 — — — — — — — 2,021,703,944.38 — — —
2017 ANNUAL REPORT
3704827-t01fnar (Shandong Chenming) p.31 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
V. Investments (Cont’d)
3. Material non-equity investments during the reporting period
√ Applicable Not applicable
Unit: RMB
Accumulated
Industry in Accumulated realised
which the actual amount return as of Reasons for failure
Fixed assets investment Investment invested as of the end of in meeting scheduled Date of
Form of investment project amount during the the end of the reporting progress and disclosure
Project name investment or not operates reporting period reporting period Source of fund Progress Estimated return period estimated return (if any) Disclosure index (if any)
Forestry paper Self- Yes Pulp 802,532,697.23 2,482,982,255.45 Self-raised and 78.00% The expected net profit 0.00 Not yet completed 2 August 2013 http://www.cninfo.com.cn/
integration project of constructed production borrowings of the forest base will
Huanggang Chenming amount to RMB102 million
and the expected average
total profit per annum of
the industrial project will
amount to RMB350 million.
510,000 tonne high-end Self- Yes Paper making 577,977,304.68 697,210,244.24 Self-raised and 1.44% Upon the completion 0.00 Not yet completed 18 February 2017 http://www.cninfo.com.cn/
cultural paper project constructed borrowings of construction and
of Shouguang Meilun commencement of
production of the project,
the expected profit will
amount to RMB308 million.
400,000 tonne chemical Self- Yes Pulp 1,188,512,282.02 1,801,971,276.32 Self-raised and 43.84% Upon the completion 0.00 Not yet completed 21 March 2014 http://www.cninfo.com.cn/
pulp project of constructed production borrowings of construction and
Shouguang Meilun commencement of
production of the project,
the expected total profit
will amount to RMB410
million.
Magnesite project Self- Yes Mining 289,216,242.71 1,047,440,597.94 Self-raised and 99.00% The expected average total 0.00 Not yet transfer to fixed 25 October 2012 http://www.cninfo.com.cn/
constructed borrowings profit per annum RMB184 assets as at the end of
million the reporting period
Newsprint paper to Self- Yes Paper making 902,644,220.48 902,644,220.48 Self-raised and 30.00% — 0.00 Not yet completed Not applicable
cultural paper machine constructed and pulp borrowings
and transformation production
of the ancillary pulp
production lines
Total — — — 3,760,882,747.12 6,932,248,594.43 — — — 0.00 — — —
4. Financial asset investment
(1) Security investments
Applicable √ Not applicable
The Company did not have any security investments during the reporting period.
(2) Derivatives investments
Applicable √ Not applicable
The Company did not have any derivative investments during the reporting period.
32 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
V. Investments (Cont’d)
5. Use of proceeds
√ Applicable Not applicable
(1) General use of proceeds
√ Applicable Not applicable
Unit: RMB’0,000
Total Total Proportion
amount of amount of Total of total Total
utilised Total proceeds amount of amount of amount
proceeds amount of with change accumulated accumulated Total Use and of idle
Fund- Total during the accumulated in use during proceeds proceeds amount of status of proceeds
raising amount of current utilised the reporting with change with change unutilised unutilised for over
Year method proceeds period proceeds period in use in use proceeds proceeds 2 years
2017 Public 119,820 119,820 119,820 0 0 0.00% 0 Not
offering of applicable
corporate
bonds
Description of the general use of proceeds
On 13 March 2017, the Company received the Approval (Zheng Jian Xu Ke [2017] No. 342) from the China
Securities Regulatory Commission for the public offering of corporate bonds of not more than RMB4.0 billion.
On 21 August 2017, the Company issued the first tranche of corporate bonds for 2017 to qualified investors,
with total proceeds raised of RMB1,200 million. After deducting the issuance expense paid of RMB1.80 million,
the net proceeds raised of RMB1,198.20 million were deposited to the designated account for the proceeds of
corporate bonds.
2017 ANNUAL REPORT
3704827-t01fnar (Shandong Chenming) p.33 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
V. Investments (Cont’d)
5. Use of proceeds (Cont’d)
(2) Commitment of proceeds
√ Applicable Not applicable
Unit: RMB’0,000
Change Invested Accumulated Investment Return
in project Total Total amount invested progress as realised Expected
Committed (including committed investment during the amount as at at the end Expect date during the return being Significant
investment project partial investment after reporting the end of of the Period of operation reporting achieved change in
and excess proceeds change) of proceeds adjustment (1) period the period (2) (3)=(2)/(1)
of the project period or not project
Committed investment project
Swap of bank loans No 119,820 119,820 119,820 119,820 100.00% 22 August 2017 Not Not No
applicable applicable
Subtotal of committed — 119,820 119,820 119,820 119,820 — — Not — —
investment project applicable
Amount, use and Not applicable
utilisation of
excess proceeds
Change in place of Not applicable
implementation of
investment project
of proceeds
Adjustment on Not applicable
implementation
method of investment
project of proceeds
Pre-investment and Not applicable
swap of investment
project of proceeds
Temporary Not applicable
replenishment of
liquidity by idle
proceeds
Balance and reason Not applicable
for proceeds
arising from project
implementation
Use and direction of Proceeds had been fully utilised.
unused proceeds
Use of proceeds and None.
problems disclosed or
other issues
34 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
V. Investments (Cont’d)
5. Use of proceeds (Cont’d)
(3) Change in use of proceeds
Applicable √ Not applicable
The Company did not have any change in use of proceeds during the reporting period.
VI. Disposal of material assets and equity interest
1. Disposal of material assets
√ Applicable Not applicable
Net profit
contribution to
the Company Ratio of net profit
from the beginning contribution to Carried out on
of the period the Company Relationship with schedule or not,
Transaction up to the of disposal of Related party counterparty (ies) Relevant asset i not, the reasons
consideration disposal date Effect of disposal on the asset over total Pricing basis of disposal transaction (in case of related tit e ful y Relevant debt ful y and measures taken
Counterparty(ies) Asset disposed of Disposal date (RMB’0,000) (RMB’0,000) Company (note 3) net profit (%) of asset or not party transaction) transferred or not transferred or not by the Company Disclosure date Disclosure i dex
Jinrun Fangzhou Property 2601- 2617, 24 February 8,200 5,832 The disposal of asset 1.55% Determined by parties No Not appl cable Yes Yes Not appl cable 1 March 2017 http://www.cninfo.com.cn
Science Block A, Cyber Tower, 2017 is beneficial for the involved through
and Technology No. 2 Zhongguancun revitalisation of the negotiation after
Co., Ltd. South Street, Haidian Company’s assets, considering various
District, Bei i g optimisation of factors, including the
resources allocation and basic condit on of subject
enhancement of fund project, transaction price
utilisation efficiency. of nearby property and
Relevant i come has been other factors.
accounted for profit for the
period, which can boost
the profitabi i y for 2017.
2. Disposal of material equity interest
Applicable √ Not applicable
2017 ANNUAL REPORT
3704827-t01fnar (Shandong Chenming) p.35 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:26
V Discussion and Analysis of Operations
VII. Analysis of major subsidiaries and investees
√ Applicable Not applicable
Major subsidiary and investees accounting for over 10% of the net profit of the Company
Unit: RMB
Type of Registered Operating
Name of company company Principal activities capital Total assets Net assets Revenue profit Net profit
Zhanjiang Chenming Subsidiary Production and sale of 5,550,000,000 19,637,972,265.93 7,674,094,388.74 9,314,971,712.72 1,980,723,132.50 1,684,736,236.73
Pulp & Paper Co., Ltd. pulp, duplex press paper,
electrostatic paper
Shandong Chenming Subsidiary Paper product trading and 7,700,000,000 35,412,243,151.58 26,091,740,690.40 2,768,375,693.24 1,074,327,081.23 875,802,429.89
Financial Leasing Co., Ltd. financial leasing
Shouguang Meilun Paper Co., Ltd. Subsidiary Production and sale of coated 3,000,000,000 9,882,253,940.98 5,286,042,008.02 4,940,598,286.91 221,294,183.74 202,049,304.67
paper and household paper
Jiangxi Chenming Paper Co., Ltd. Subsidiary Production and sale of light 2,038,116,000 5,081,399,764.50 2,390,668,674.54 3,323,823,190.88 338,019,850.01 293,490,046.91
weight paper and white paper
board
Acquisition and disposal of subsidiaries during the reporting period
√ Applicable Not applicable
Methods to acquire and
dispose of subsidiaries Impact on overall production and
Name of companies during the reporting period operation and results
Shanghai Chenming Industry Co., Ltd. Newly established Net profit of – RMB6,832,513.72
Shanghai Hongtai Real Estate Co., Ltd. Equity acquisition From the date of inclusion into the scope of
consolidation to the end of the reporting period, net
profit amounted to – RMB36,856,878.73
Shanghai Chenming Financial Newly established No effect on overall operation and results
Leasing Co., Ltd.
Guangzhou Chenming Financial Newly established Net profit of RMB98,465.85
Leasing Co., Ltd.
Guangzhou Chenming Newly established Net profit attributable to the parent company was
Commercial Factoring Co., Ltd. RMB404.34
Shandong Chenming Newly established Net profit of RMB843,198.40
Commercial Factoring Co., Ltd.
Chengdu Chenming Newly established No effect on overall and operation and results
Culture Communication Co., Ltd.
Beijing Chenming Newly established No effect on overall and operation and results
Culture Communication Co., Ltd.
Qingdao Chenming Pulp and Newly established Net profit of RMB2,327,743.51
Paper Electronic
Commodity Exchange Co., Ltd.
Xuchang Chenming Paper Co. Ltd. Newly established Net profit RMB attributable to the parent company
of – RMB17,007,455.36
Shouguang Chenming Consolidation by merger No effect on overall and operation and results
Hongxin Packaging Co., Ltd.
Jilin City Chenming Machinery Equity transfer Effect on current net profit of RMB480,189.88
Manufacturing Co., Ltd.
Particulars of major subsidiaries and investees
(1) Zhanjiang Chenming’s major products, including high-end cultural paper and white paper board, had higher average
selling prices, higher gross profit margin and stronger profitability.
(2) Financial Leasing Company made steady progress and delivered better profit.
(3) Benefiting from the higher prices of coated paper and living paper, Shouguang Meilun recorded better profit.
(4) Jiangxi Chenming’s major products, including high-end cultural paper, had higher selling price, higher gross profit and
stronger profitability.
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V Discussion and Analysis of Operations
VIII. Structured entities controlled by the Company
Applicable √ Not applicable
IX. Outlook on the future development of the Company
(I) Competition overview and development trend of the industry
Paper making industry
The growth in production and consumption in the paper making industry is closely related to the domestic economic
development. Benefiting from the continuous stable macroeconomic growth, the development of the paper making
industry will maintain stable growth in the long run. In recently years, the central government has been introducing
various industry policies such as production capacity reduction, the supply-side reform, ten rules regarding water
pollution and ten rules regarding air pollution. Different measures such as setting higher emission standards and
strictly restricting corporate size and structure put stricter restrictions on the enterprises in the paper making industry
and force those enterprises with backward production capacity to actively exit the paper making market. With the
continuous introduction of production capacity reduction, the supply-side reform and other policies, the environmental
protection policies have becoming stricter. The elimination of backward production capacity in the paper making
industry has been progressing smoothly. New production capacity mainly comes from large enterprises. It is expected
that the industry concentration ratio will further increase. The improvement in the supply in the industry has effectively
boosted the dual growth in revenue and profitability of the enterprises in the paper making industry. The downstream
demand in the paper making industry will continue to grow along with the domestic economic growth. The turning
point in the supply and demand structure in the industry has gradually developed with a boom in the industry to be
prolonged.
Financial leasing industry
As the financial reforms advance further, the integration of industrial capital and financial capital gradually accelerate
in China. The financial leasing industry as a favoured supplementary corporate financing channel and an effective tool
to use assets at hand embraces continuously mounting market demand. Since the implementation of the “Thirteenth
Five Year Plan”, the accelerated urbanisation and industrialisation in China, the change in drivers of economic growth,
upgrade of traditional industries, development of emerging industries, and continuous infrastructure construction
require substantial investment in fixed assets. China will become the largest leasing market in the world. According
to the Research Report on Business Prospects Survey of and Investment Strategies in the China Financial Leasing
Industry 2016-2021 issued by ASKCI Consulting Co. Ltd, the financial leasing industry will grow at a compound
annual growth rate of over 20% in the future and it is expected that the outstanding leasing contracts of the financial
leasing industry in China will amount to RMB20.79 trillion by 2021.
In view of the establishment and optimisation of trading rules, accounting standards, industry regulation and tax
policies for the financial leasing industry, the financial leasing in China will present a development trend with stable
growth in scale, in-depth expansion of scope of business, further enlarged agglomeration, improving professionalism,
further strengthening risk prevention and control, and consolidating foundation for development in the future. The
size of the financial leasing business in China will expand significantly. Financial leasing will become an important
alternative of financing for enterprises, especially small and medium-sized enterprises. The business prospects of the
financial leasing industry in China are promising.
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V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(II) Development strategy
Looking forward, the Company will adhere to the principal of emphasising on environmental protection, low carbon,
recycling and sustainable development. Following the “Made in China 2025 Plan” and the principles of scientific
development and quality and efficiency enhancement, it will comprehensively improve its quality and efficiency,
management level, technology application, sense of happiness and brand image through the integration between
its production and manufacture segment and financial services segment, incorporation of smart technology into
its industrial activities, reorganised methodology and restructuring so as to expand and improve itself and strive to
achieve taxable profit over RMB10 billion and strive to become one of the world-class companies with the highest
growth rate during the “Thirteenth Five Year Plan” period.
Transformation and upgrade strategy: The Company will comprehensively improve the industrial structure and
regional layout; emphasise on the development of the five leading businesses, namely paper making, finance, fibre
yarn, forestry and so on; and construct an efficient industrial system with synergies.
Green development strategy: Remaining steadfast in the operation philosophy of “forestry-pulp-paper-fibre-yarn
integration”; with technical progress, advanced equipment and strict and prudent management, the Company will
promote clean production and recycling economy, become a low-energy consumption and environmentally-friendly
enterprise. The Company seeks for development while protecting the environment and maintains higher environmental
protection standards while seeking for scientific development, thus achieving a “win-win” situation in economic
development and environmental protection.
International operation strategy: The Company, based in China with a global reach, will follow the national strategy of
the “Belt and Road” initiative, accelerate its pace of “going global”, reinforce global exchanges and communication
and gradually expand its overseas market.
Operational excellence strategy: By adhering to the management policy of “management enhancement, team building,
outstanding business performance and good results”, the Company will constantly heighten its whole process
management including production and operation, marketing, financial costs and project construction, effectively
integrate its systems and resources, and strive to upgrade the Company’s management capacity and profitability.
Strengthening the Company through talent strategy: By improving talent development, introduction, application and
incentive mechanisms, and nurturing high-end, versatile, innovative and international talents, Chenming will become
one of the world-class companies with the highest growth rate.
Harmonious development strategy: By comprehensively enhancing enterprise culture building, caring for the
employees, acting on its corporate social responsibilities, and elevating its integrated value-creating ability in terms of
economy, society and environment, Chenming will create a positive corporate image for itself and strive to become a
harmonious enterprise.
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V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(III) Operation plans for 2018
In 2018, the main goal of the Company is adherence to the main theme of achieving growth amid stability, the general
goal of “developing into an enterprise with hundreds of billions in value and forging Chenming into a centennial brand”
and the guiding principal of work of “team building, management enhancement, outstanding business performance
and good results”. The Company will fully carry forward its corporate style of “tackling problems once discovered”
and strive to enhance management and efficiency while emphasising project construction and committing itself to,
among other things, operating steadily, boosting growth, adjusting the structure, preventing risks and benefiting the
employees, so as to take corporate development to a new level. The major measures are as follows:
1. Determined to upgrade corporate management
The guiding ideology of the Company’s management in 2018 is “solid foundation, new talents, guaranteed
implementation and strict evaluation”.
(1) Enhance team building: The Company will focus on staff training, training system building, hierarchical
training material preparation and overall elevation of all employees’ comprehensive capabilities and
management capacity of each level, ensuring qualified work. The Company will further nurture young
management personnel, revitalise the management, and introduce high-end talents to effectively support
the Company’s development. The Company will further improve its performance appraisal, widen the
gap in distribution hierarchy and motivate the entire staff.
(2) Solidify basic management: The Company will apply a firmer grip on systematic and procedural
early warning and feasibly elevate the scientific and standardised level. The Company will perform
supervision and inspection on the implementation of policies and performance of functions of each
department, provide assistance and rewards as appropriate and further promote the management
capacity of the Company.
2. Determined to strengthen operations management and innovation
In 2018, with new projects going into production, the Company, facing tougher market conditions, will march on
with “confidence, courage, positiveness and initiative”.
(1) Enhance basic management: The Company will dedicate itself to the information technology
development for the sales and full mechanical operation. The Company will increase its efforts into
market survey, and conduct comprehensive follow-up inspections and appraisal for basic management
and business priorities on a monthly basis.
(2) Focus on return management: With confidence, the Company will increase the selling prices in a timely
manner based on the actual market conditions and reap the returns on higher prices. The Company
will promote its returns through product structure adjustments and launch of products of higher returns.
The Company will standardise channel management and deepen its cooperation with the major
customers. The Company will increase its investments in markets of close proximity to realise returns.
(3) Determined to enhance risk management: Collection of past due accounts, being a critical part of our
marketing, must be personally handled by the management. The Company will tighten its assessment
procedure and increase its efforts into preventing new past due accounts and past due collection.
The Company will standardise its credit management by extending credit based on effective assets of
customers and reduce the payment period and credit extended to customers in default. The Company
will continue to promote real estate mortgage with certain customers. The Company will heighten
prepayment operations.
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V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(III) Operation plans for 2018 (Cont’d)
3. Determined to enhance production management, innovation and efficiency
(1) Enhance basic management: The Company will comprehensively streamline the control procedure of
its subsidiaries and enhance supervision and appraisal. The Company will add talents to the teams and
break through barriers currently suppressing its efficiency and elevate the management capacity.
(2) Promote technological innovations: The Company will recruit technicians of high calibre, advance
the industry-university-research cooperation, accelerate the introduction and integration of international
advanced technologies such as high-efficient production and water saving while upgrading its own
independent capability of research and development. The Company will continue to optimise its
product structure and increase its returns by focusing on the development of new products such as pure
texture paper, super electro-static paper and food package board as well as increasing the production
of high-margin products. The Company will introduce new technologies and new materials such as
dipropylene latex, mechanical pulp penetrant and surface enhancement to increase its returns.
(3) Enhance safety and environmental protection: The Company will implement safety standardisation
management and provide basic safety educational training to enhance awareness and capabilities
on safety protection of the employees, sparing no efforts in the prevention of major accidents. The
Company will continue to invest in environmental protection with new projects such as membrane
treatment for reclaimed water recycling and comprehensive utilisation of solid waste, becoming a first-
rate company in the industry. The Company will identify, rectify and assess potential hazards with zero
tolerance, ensuring rectification rate of 100%.
(4) Step up in project management: The Company will strengthen monthly inspections and appraisals and
delegate more power to the management to enhance project supplies and progress management, prevent
any issue from arising in project management and provide rewards in cases of timely or early completion.
The Company will build a production team with sound personnel allocation with proper training to
design mechanical production plans, striving for production that excels in efficiency, quantity and quality.
4. Determined to enhance financial management and achieve steady growth
(1) Enhance risk management in the finance sector: The Company will be professionally equipped, improve
and strictly implement its risk management system and realise mechanical control with information
technology system, preventing business risks. The Company will standardise the finance leasing
business and reinforce the post-lease management for existing projects.
(2) Strengthen financing management: The Company will advance the issuance of privately placed bonds,
renewable corporate bonds, perpetual medium-term notes and private placement to improve its debt
structure and reduce the gearing ratio. The Financial Leasing Company and the Finance Company will
together form a complete financing system and gradually achieve a virtuous financing circle.
40 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(III) Operation plans for 2018 (Cont’d)
5. Determined to enhance supply chain building and increase business value
(1) Enhance basic management: The Company, by virtue of information technology platforms such as
process building, international tender network and contract management, will strengthen its control over
suppliers and business processes, comprehensively enhancing the level of information management for
procurement.
(2) Focus on procurement efficiency: The Company will focus on and rely on the sources of procurement of
bulk materials, optimise its supplier teams and procurement channels and strengthen market analysis to
keep abreast of market conditions and reduce procurement costs.
(3) Extend the scope of business: The Company will conduct the financing business relating to the
supply chain to ensure zero risk and improve efficiency. The Company will extend the channels of
raw materials to deepen the development of high-quality source customers and establish strategic
cooperation relationship with quality suppliers. The Company will also set up a dedicated team to ensure
the supply of raw materials for the production of new projects and the sustainable development of the
Company.
(4) Strengthen logistics construction: The Company will introduce logistics professionals for the
construction of a logistics information platform to establish an intelligent logistics system and facilitate
the logistics construction of the Group. The Company will promote the construction of the Shouguang
Chenming International Logistics Centre project and the Qingdao Innovative Industrial Park project.
6. Caring for employees and sharing the results of development
Firstly, the Company will establish a scientific training system to provide a smooth promotion channel,
strengthen internal training, helping its employees grow quickly and provide them with more development
opportunities and a promotion platform. Secondly, the Company will redesign and change the work uniform
for employees to showcase the brand new spirits of the employees, which will greatly improve the image and
satisfaction of employees. Thirdly, the Company will continue to build more garden-like factories to create a
beautiful Chenming and a more pleasant working environment for the employees. Fourthly, the Company will
rationalise the salary increment mechanism to improve the staff’s income in real terms so as to make sure the
salary level of its staff is relatively higher than those of its local counterparts and industry peers.
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V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(IV) Future capital requirements, source of funds and plan for use
The Company has established a conglomerate principally engaged in paper making, finance, pulp and fibre and
mining businesses, etc.. With the further development of the existing principal businesses of the Company, the future
capital requirements of the Company will be: (1) investment in the existing projects under construction and proposed
new projects; (2) consistent investment in the existing production facilities because of technological transformation
or production expansion; and (3) business expansion and general working capital requirements. As the demand for
capital has been growing for the Company’s production and operation, there is a strong need to replenish the working
capital to enhance the Company’s capability for sustainable operations.
In order to meet the business development requirements of the Company and further extend and expand the industry
chain, the Company will establish diversified financing channels and increase the proportion of direct financing
through diversified financing channels such as private placement, corporate bonds, perpetual bonds, short-term
commercial paper and cross-border financing so as to improve the debt structure of the Company and provide stable
financial support for the operation and development of the Company.
Diversified financing channels to meet the Company’s capital requirements: (1) The Company will use RMB3.7 billion
from private placement to reduce the cost of paper making. The investment in the 400,000-tonne chemical pulp
project through private placement will improve the self-sufficiency of pulp of the Company and the raw materials
structure of the paper making segment, in the expectation of reducing the production costs of paper making and
enhancing profitability of paper making business. At the same time, non-public issuance of shares will optimise the
debt structure and reduce financial costs as well as the gearing ratio. (2) The Company will reduce the financing
costs and optimise the capital structure by issuing corporate bonds, medium-term notes, short-term financing,
super short-term financing, perpetual bonds and other means for financing so as to provide financial support for the
Company’s long-term healthy development. (3) The Company will facilitate cross-border financing by making full
use of the financing platform in Hong Kong market to increase its credit facilities. Besides, the Company will also
mitigate exchange rate risk through multi-currency financing and improve the efficiency of use of capital to reduce
financial costs. As at the end of 2017, the credit facilities utilised by the Company amounted to RMB47.7 billion and
the banking credit facilities obtained by the Company amounted to RMB75.6 billion with an utilisation rate of 63.07%.
(4) The Company will make use of the advantages of the Finance Company and the Financial Leasing Company in the
financial industry to expand the financing channels for the Group, bring new momentum for business development.
42 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(V) Risk factors likely to be faced and the measures to be taken
1. Risk on paper making industry
Policy risk
Paper making industry is a basic raw materials industry and its growth has been faster than the average
growth of the national economy in recent years. However, the paper making industry’s profitability is closely
correlated to the economic cycle, and the industry is therefore a cyclical industry fluctuating with the national
macroeconomic performance, which will further affect the profitability of the Company.
Hence, following the principles of scientific development and quality and efficiency enhancement, the Company
will comprehensively improve its industrial structure and regional layout through the integration between its
production and manufacture segment and financial services segment, and incorporation of smart technology
into its industrial activities. The Company will emphasise on the development of leading businesses including
paper making, finance, pulp and fibre and mining so as to construct an efficient industrial system with synergies.
Market fluctuation risk
With the rapid growth of the national economy, economic globalisation and China’s accession to the WTO,
China’s paper making industry has been facing increasingly fierce competition. Leveraging the strength and
capital accumulated over the years, domestic enterprises have further expanded their size and improved their
technological levels and product quality. Well-known paper making enterprises overseas have also directly set
up production bases in China through sole proprietorship or joint ventures so as to participate in the domestic
market competition by virtue of their advantages in size and technology. Besides, tariff reduction on China after
accession to the WTO has also further intensified the impact on the international market.
Hence, the Company will strive to enhance the quality of paper products and achieve the target of establishing
a layout for high-end paper industry so as to increase the proportion of high-end paper. In recent years, the
Company has been expanding its business size and optimising its product mix and has set up a few production
lines for high-end paper. A diversified and high-end product mix enables the Company to spread market risk
and strengthen the resistance towards market volatility. Besides, as high-end products have better profit
margins, the Company can increase the proportion of high-end products through consistent improvement in
product mix, thereby enhancing its profitability and comprehensive competitiveness.
2017 ANNUAL REPORT
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V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(V) Risk factors likely to be faced and the measures to be taken (Cont’d)
1. Risk on paper making industry (Cont’d)
Risk of overcapacity and slowdown in demand
Overcapacity is a prominent problem in the paper making and paper product industry in China such that
there has been fierce competition among enterprises. Since 2013, affected by slowdown in macroeconomic
growth, the demand in paper making industry has been weak. At the same time, China has been encouraging
energy conservation and emission reduction. The obsolete production capacity will be phased out, and thus
the new projects will be on a large scale. By virtue of the economies of scale in the paper making industry,
the production capacity of individual paper making projects which are under construction or planning for
construction in China is large, which affects the demand and supply relationship in the whole paper making
industry.
Hence, the Company will make advancements in equipment and technological level, expand its product mix,
improve the grading of products and focus on the research and development of high-end products so as to
improve competitiveness.
Risk of price fluctuation of raw materials
The major raw materials used by the Company are wood pulp and waste paper. The market prices of wood pulp
and waste paper fluctuate significantly. The market price fluctuation of raw material has significantly affected the
production costs of the Company. In addition to intensified market competition resulting from surging capacity
in the industry in recent years, the increases in prices of a number of paper products were not in line with the
increases in prices of raw materials. The market price fluctuation of raw materials will have an impact on the
performance of the Company.
Hence, the Company will remain steadfast in the “forestry-pulp-paper integration” development path and focus
on the construction of the Zhanjiang Chenming pulp project, the Huanggang Chenming pulp project and the
Shouguang chemical pulp project, thereby eliminating the limitations of upstream resources on the Company’s
development and enhancing the Company’s sustainable development.
Risk of change in environmental protection policies
China has been raising the standards for environmental protection in recent years. More stringent environmental
protection policies have been implemented in the paper making industry with successive implementation
of environmental inspections and licensing system for pollutant discharge. A multi-pronged approach
has been adopted to promote industrial restructuring, and the paper making industry has entered into an
important transitional period of development. A higher emission standard is bound to increase the Company’s
environmental protection costs and a high entry standard may result in the slowdown of scale expansion.
The Company always strives to achieve harmonious development with energy conservation and emission
reduction. The Company will endeavour to develop the recycling economy through waste exchange and
recycling and strive to maximise its resource utilisation. Meanwhile, the Company will make greater efforts to
construct environment friendly projects and strive to achieve its waste emission target.
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V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(V) Risk factors likely to be faced and the measures to be taken (Cont’d)
2. Risk on financial leasing business
Policy risk
Recently, the financial leasing business is regulated by the commerce departments at different levels instead of
being directly regulated by the People ‘s Bank of China or China Banking Regulatory Commission. The financial
leasing industry in China is still at the exploration stage with incomplete laws and regulations. If there is any
material adjustment or change in national or local policies for the financial leasing industry, the Company’s
financial leasing business may be adversely affected, in turn harming the Company’s profitability.
In September 2015, the General Office of the State Council promulgated the Guiding Opinions on Accelerating
the Development of Financial Leasing Industry, which formulated comprehensive systematic planning on
accelerating the development of the financial leasing industry. The financial leasing industry embraced a rare
opportunity for leap-forward development. In February 2016, the General Office of People’s Government of
Shandong Province promulgated the Opinions of the General Office of People’s Government of Shandong
Province on Accelerating the Development of Financial Leasing Industry by Implementing Document Guo Ban
Fa [2015] No. 68, formulating specific measures to refine policy measures and ensure the measures being
carries out properly, which provided actual policy support for the development of the financial leasing industry
in Shandong Province.
Liquidity risk
In a market economy, the macroeconomic operation tends to be in cycles and the Company is inevitably
affected by those cycles. At the same time, there is fierce competition in the financial industry and the interest
margin is a main source of income for the financial leasing business. The market interest rate is affected by
the benchmark interest rate of the People’s Bank of China, the macroeconomic environment, market demand
and supply and other factors, bringing uncertainties to the fluctuation of the market interest rate, which in turn
causes uncertainties in revenue from the financial leasing business.
Hence, following the principles of scientific development and quality and efficiency enhancement, the Company
will comprehensively improve its industrial structure and regional layout through the integration between its
production and manufacture segment and financial services segment, and incorporation of smart technology
into its industrial activities. The Company will emphasise on the development of leading businesses including
paper making, finance, pulp and fibre, real estate and mining so as to construct an efficient industrial system
with synergies.
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V Discussion and Analysis of Operations
IX. Outlook on the future development of the Company (Cont’d)
(V) Risk factors likely to be faced and the measures to be taken (Cont’d)
2. Risk on financial leasing business (Cont’d)
Credit risk
The Company may suffer from loss if the lessees of its financial leasing business cannot make full rental
payment on time due to any reason and there are abuses on equipment or any other short-term behaviour.
Although the risk of such rental being unrecoverable is minimal, the Company will also make bad debt provision
as required under its accounting policy. If such amounts cannot be recovered on time, the Company may be
exposed to risk of bad debts.
The stringent risk management measures of Chenming Leasing provide comprehensive risk prevention
and management for the Company’s projects. Besides, the Company usually cooperates with state-owned
enterprises and local governments, so it has strong risk resistance and low risk of default. The Company does
not have any non-performing or overdue loans so far. Chenming Leasing will develop quality customers and
strengthen risk management so as to enhance risk resistance and maintain high quality services.
Operation risk
Recently, there is still a gap between the practitioners working in the financial leasing industry and those working
in traditional financial institutions such as banks in terms of their expertise and experience in financial profession
in China. There is also a large gap in terms of investment in infrastructure. If internal control procedures are
not implemented properly and involve operation risk as a result of operation errors, violations or non-standard
execution, the Company may suffer from loss.
Learning from the risk management experience of outstanding financial leasing companies at home and abroad,
the leasing company has formulated and optimised the internal management system of the leasing business
and established an effective system for risk assessment, risk control and risk tracking. The Company has
also exercised proper control on business risk by regulating the key business procedures including quotation,
guarantee review, contract signing, leased assets management and archives management.
X. Reception of research investigations, communications and interviews
Applicable √ Not applicable
During the reporting period, there was no reception of research investigations, communications and interviews by the
Company.
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VI Directors’ Report
The Directors (the “Directors”) of the Company hereby present the annual report and the audited consolidated financial statements
of the Company and the Group for the year ended 31 December 2017.
I. Principal activities
Please refer to section IV “Business Overview”, and “I. Principal operations of the Company during the Reporting Period”
and “II. Analysis of principal operations” under section V “Discussion and Analysis of Operations” for details of principal
activities of the Company.
II. Results and profit distribution
Please refer to section XIII “Financial Report” for the results of the Group for the year ended 31 December 2017.
III. Dividends and Conversion of Shares
After the end of the reporting period, the Board proposed to pay a final dividend for the year ended 31 December 2017 (“final
dividend”) of RMB6.00 in cash for every 10 Shares (tax inclusive) and a capitalisation issue made out of the capital revers
for 5 shares for every ten shares (2016: dividend of RMB6.00 in cash for every 10 Shares (tax inclusive)) to the ordinary
shareholders of the Company, subject to approval of shareholders at the forthcoming Annual General Meeting (“AGM”) of
the Company held on 18 May 2018. Upon approval of shareholders of the Company at the AGM, the Company is expected
to pay the final dividend on or by 17 July 2018 to shareholders whose names appear on the register of members of the
Company on 18 May 2018.
In accordance with the Corporate Income Tax Law of the PRC and its implementation rules effective on 1 January 2008,
where a PRC domestic enterprise distributes dividends for financial periods beginning from 1 January 2008 to non-resident
enterprise shareholders, it is required to withhold 10% corporate income tax for such non-resident enterprise shareholders.
Therefore, as a PRC domestic enterprise, the Company will, after withholding 10% of final dividends as corporate income
tax, distribute the final dividends to non-resident enterprise shareholders, i.e. any shareholders who hold the Company’s
Shares in the name of non-individual shareholders, including but not limited to HKSCC Nominees Limited, or other
nominees, trustees, or holders of H Shares registered in the name of other organisations and groups.
Due to changes in the PRC tax laws and regulations, according to the Announcement on the List of Fully and Partially
Invalid and Repealed Tax Regulatory Documents issued by the State Administration of Taxation (
) on 4 January 2011, individual Shareholders who hold the Company’s H
Shares and whose names appeared on the H Share Register of the Company can no longer be exempted from individual
income tax pursuant to the Notice of the State Administration of Taxation Concerning the Taxation of Gains on Transfer
and Dividends from Shares (Equities) Received by Foreign Investment Enterprises, Foreign Enterprises and Foreign
Individuals (Guo Shui Fa [1993] No. 045) ( ( )
( [1993]045 )) issued by the State Administration of Taxation, whilst pursuant to the letter titled
Tax Arrangements on Dividends Paid to Hong Kong Residents by Mainland Companies issued by the Stock Exchange to
the issuers on 4 July 2011 and the Notice on Matters Concerning the Levy and Administration of Individual Income Tax
after the Repeal of Guo Shui Fa [1993] No. 045 of State Administration of Taxation (Guo Shui Han [2011] No. 348) (
[1993]045 ( [2011]348 )), it is confirmed that
the overseas resident individual shareholders holding shares of domestic non-foreign invested enterprises issued in Hong
Kong are entitled to the relevant preferential tax treatments pursuant to the provisions in the tax arrangements between the
countries where they reside and the PRC or the tax arrangements between the PRC and Hong Kong or the Macau Special
Administrative Region of the PRC. Therefore, the Company will withhold 10% of the dividend as individual income tax,
unless it is otherwise specified in the relevant tax regulations and tax agreements, in which case the Company will withhold
individual income tax of such dividends in accordance with the tax rates and according to the relevant procedures as
specified by the relevant regulations.
2017 ANNUAL REPORT
3704827-t01fnar (Shandong Chenming) p.47 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:32
VI Directors’ Report
IV. Closure of register of members
The register of members of the Company will be closed from 17 April 2018 (Tuesday) to 18 May 2018 (Friday), (both
days inclusive), during which no transfer of shares of the Company will be registered. In order to be eligible to attend and
vote at the annual general meeting to be held on 18 May 2017 (Friday), all share transfer documents accompanied by
the corresponding share certificates must be lodged with the Company’s Hong Kong share registrar and transfer office,
Computershare Hong Kong Investor Services Limited at shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road
East, Wan Chai, Hong Kong for registration not later than 4:30 p.m. on 16 April 2018 (Monday).
V. Five-year financial summary
Please refer to “IX. Five-year financial summary under paragraph 19 of appendix 16 of the Hong Kong Listing Rules”
under section II “Company Profile and Key Financial Indicators” for the financial summary of the Company for the past five
financial years.
VI. Donations
During the year, the Company donated RMB1,950,000 (2016: RMB1,000,000) to non-profit making organisations.
VII. Subsidiaries
Please refer to “VII. Analysis of major subsidiaries and investees” under section V “Discussion and Analysis of Operations”
and “XX. Matters of significant of subsidiaries of the Company” under section VII “Material Matters” for the details of
acquisition and disposal of subsidiaries by the Company during the year.
VIII. Property, plant and equipment
Please refer to “1. Consolidated Balance Sheet” under section XIII “Financial Report” for the details of changes in property,
plant and equipment of the Group for the year ended 31 December 2017.
IX. Share capital
Please refer to “I. Changes in shares” under section VIII “Changes in Share Capital and Shareholders” for details of changes
in share capital of the Company for the year ended 31 December 2017.
X. Pre-emptive rights
In accordance with the Articles of Association and the PRC laws, there are no rules requiring the Company to grant existing
shareholders pre-emptive rights on newly issued shares of the Company in proportion to their shareholdings.
XI. Transfer into reserves
The Company’s contributed surplus is distributable to shareholders in accordance with the Companies Law. As at 31
December 2017, the Company’s reserves available for cash distribution and/or distribution in specie, including contributed
surplus of the Company, amounted to RMB9,514,629,584.05 (2016: RMB7,393,989,520.67) as set out in “1. Consolidated
Balance Sheet” under section XII “Financial Report”.
48 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3704827-t01fnar (Shandong Chenming) p.48 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:32
VI Directors’ Report
XII. Directors
As at 31 December 2017, the Directors of the Company were:
1. Executive Directors
Mr. Chen Hongguo
Mr. Yin Tongyuan
Mr. Geng Guanglin
Mr. Li Feng
2. Non-executive Directors
Ms. Zhang Hong
Ms. Yang Guihua
3. Independent Non-executive Directors
Ms. Liang Fu
Ms. Wang Fengrong
Mr. Huang Lei
Ms. Pan Ailing
According to the Articles of Association of the Company, all Directors, including non-executive Directors, have been elected
at the general meetings with a term of three years from May 2016 to May 2019. They may be re-elected for another term
upon expiry of tenure.
XIII. Directors’ service contracts
All Directors have entered into service contracts with the Company for a term from 18 May 2016 to 17 May 2019.
None of the Directors who have offered themselves for re-election at the forthcoming AGM have entered into any service
contract with the Company or any of its subsidiaries which cannot be terminated by the Group within one year without
payment of compensation other than statutory compensation.
XIV. Directors and Senior Management’s remuneration and the five highest paid individuals
Details of Directors and the Senior Management’s remuneration and the five highest paid individuals of the Company or/and
its subsidiaries are set out in part V of section X and part XII of section XII.
In 2017, the Company had 23 Senior Management members in total, which included directors, supervisors and the Senior
Management. The remuneration of the Senior Management falls within the following ranges:
Range of remuneration (RMB) Number
4.8 million to 5.2 million
3.6 million to 4.0 million
3.2 million to 3.6 million
2.8 million to 3.2 million
2.4 million to 2.8 million
2.0 million to 2.4 million
1.6 million to 2.0 million
1.2 million to 1.6 million
0.8 million to 1.2 million
Below 0.8 million
2017 ANNUAL REPORT
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OUTPUT: 27-03-2018 16:29:32
VI Directors’ Report
XV. Independent Non-executive Directors
The Company has received from each of the independent non-executive Directors a confirmation of independence for the
year pursuant to Rule 3.13 of the Hong Kong Listing Rules and considered all of the independent non-executive Directors to
be independent during the year.
XVI. Securities interests held by Directors, Supervisors and Chief Executives
As at 31 December 2017, interests of the Company or its associated corporations (within the meaning of Part XV of SFO)
held by each of the Directors, Supervisors and Chief Executives of the Company under section 352 of the SFO are set out
as follows:
Number of shares
(A shares) held as
at the end of the
reporting period
Name Position (shares)
Directors
Chen Hongguo (Note 1) Chairman 6,696,296
Yin Tongyuan Executive Director and Vice Chairman 2,423,640
Li Feng Executive Director 471,818
Geng Guanglin Executive Director and General Manager 437,433
Yang Guihua Non-executive Director —
Zhang Hong Non-executive Director —
Huang Lei Independent non-executive Director —
Liang Fu Independent non-executive Director —
Wang Fengrong Independent non-executive Director —
Pan Ailing Independent non-executive Director —
Supervisors
Li Dong Supervisor 100,000
Sun Yinghua Supervisor —
Yang Hongqin Supervisor —
Zhang Xiaofeng Supervisor —
50 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:32
VI Directors’ Report
XVI. Securities interests held by Directors, Supervisors and Chief Executives (Cont’d)
Associated corporations
Number of Number of
shares held at the shares held at
beginning of the the end of the
Name of reporting period Change during reporting period
Name Position associated corporations (shares) the period +/- (shares)
Chen Hongguo Chairman Shouguang Henglian 231,000,000 — 231,000,000
Enterprise Investment
Co. Ltd. (Note 2)
Note 1: Save for the 6,696,296 A shares held personally, Chen Hongguo is deemed to be interested in the 429,348 A shares held by his spouse, Li
Xueqin.
Note 2: Chen Hongguo and his spouse, Li Xueqin, collectively hold 43% equity interests in Shouguang Henglian Enterprise Investment Co. Ltd.,
(hereinafter referred to as “Shouguang Henglian”), as a result, Shouguang Henglian is deemed to be controlled by Chen Hongguo. As a result,
the 231,000,000 shares in Chenming Holdings (approximately 18.65% of the total share capital of Chenming Holdings) held by Shouguang
Henglian is also deemed to be held by Chen Hongguo.
Save as disclosed above, as at 31 December 2017, none of the Directors, Supervisors or chief executives of the Company
had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated
corporations which were required to be filed in the register of the Company required to be maintained pursuant to section
352 of the SFO or which were required to be notified to the Company and the Hong Kong Stock Exchange pursuant to the
Model Code for Securities Transactions by Directors of Listed Issuers as contained in Appendix 10 to the Rules Governing
the Listing of Securities on the Hong Kong Stock Exchange (hereinafter referred to as the “Hong Kong Listing Rules”).
As at 31 December 2016, none of the Directors, Supervisors or chief executives or their respective spouses or children
under the age of 18 held or exercised any rights to subscribe for the share capital or debentures of the Company or its
associated corporations.
XVII. Interests and short position of substantial shareholders in shares and underlying shares
As at 31 December 2017, the following shareholders (other than the Directors, Supervisors or chief executives of the
Company) had interests or short positions in the Company’s shares and underlying shares as shown in the share register
maintained by the Company in accordance with Section 336 of the SFO (Chapter 571 of the Laws of Hong Kong):
Approximate shareholding
as a percentage of
Number of shares held Total share Class of
Name (shares) capital (%) shares (%)
Shouguang Chenming Holdings Co., Ltd. 293,003,657 A shares (L) 15.13 26.32
Shouguang Chenming Holdings Co., Ltd. 137,122,226 B shares (L) 7.08 29.12
Chenming Holdings (Hong Kong) Limited 137,122,226 B shares (L) 7.08 29.12
Shouguang Chenming Holdings Co., Ltd. 102,276,000 H shares (L) 5.28 29.04
Chenming Holdings (Hong Kong) Limited 102,276,000 H shares (L) 5.28 29.04
The National Social Security Fund Council 31,638,500 H shares (L) 1.63 8.98
(L) - Long position (S) - Short position (P) - Lending pool
Save as disclosed above, as at 31 December 2017, no other person had interests or short positions in the Company’s
shares or underlying shares as recorded in the register maintained under section 336 of the SFO.
2017 ANNUAL REPORT
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OUTPUT: 27-03-2018 16:29:32
VI Directors’ Report
XVIII. Relationship with employees, customers and suppliers
Please refer to “VI. Personnel of the Company” under section X “Directors, Supervisors and Senior Management and
Staff”,“2. (8) Sales to major customers and major suppliers” of “II. Analysis of principal operations” under section V
“Discussion and Analysis of Operations” for details of the relationship between the Company and its employees, customers
and suppliers.
XIX. Directors’ interests in material contracts and indemnity provision
None of the Company or any of its subsidiaries entered into any material contracts, in which Directors had significant
interests (either directly or indirectly), that subsisted at the end of the financial year or at any time during the reporting
period. The Company did not have any indemnity provision in favour of any Director.
XX. Interests in competing business
None of the Directors or controlling shareholders of the Company was interested in any business which competes or is
likely to compete with the businesses of the Company and any of its subsidiaries.
XXI. Directors’ rights to purchase shares or debentures
At no time during the year was the Company or any of its subsidiaries a party to any arrangements to enable the Directors
to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.
XXII. Preference shares
Please refer to section IX “Preference Shares” for details of the issue of preference shares of the Company.
XXIII. Management contracts
No contracts concerning the management and administration of the whole or any substantial part of the business of the
Company were entered into or existed in 2017.
XXIV. Major risk factors
Please refer to “(V) Risk factors likely to be faced and the measures to be taken” of “IX. Outlook on the future development
of the Company” under section V “Discussion and Analysis of Operations” for details of major risk factors of the Company.
XXV. Material matters
Please refer to section VII “Material Matters” for details of material matters of the Company.
XXVI. Future development
Please refer to “(I) Competition overview and development trend of the industry”, “(II) Development strategy”, “(III) Operating
plan for 2018” and “(IV) Future capital requirements, source of funds and plan for use” of “IX. Outlook on the future
development of the Company” under section V “Discussion and Analysis of Operations” for details of future development of
the Company.
XXVII. Environment, social and governance report and social responsibility
Please refer to XVIII. Fulfilment of Social Responsibility under section VII “Material Matters” for details of fulfilment of social
responsibility. Please refer to the environment, social and governance report as required by the Hong Kong Listing Rules,
which will be issued separately by the Company before 27 June 2018.
52 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:32
VI Directors’ Report
XXVIII. Purchase, sale and redemption of shares
The Company and its subsidiaries did not purchase, sell or redeem any listed securities of the Company during the reporting
period.
XXIX. Sufficiency of public float
During the reporting period, based on the information that is publicly available to the Company and within the knowledge of
the Directors, the Company has maintained a sufficient prescribed amount of public float as required under the Hong Kong
Listing Rules.
XXX. Review of the Audit Committee
The audited consolidated financial statements of the Company for the year ended 31 December 2017 has been reviewed by
the Audit Committee of the Company.
XXXI. Gearing ratio
As at 31 December 2017, the Company’s gearing ratio (including minority interest) was 60.80%, representing a decrease
of 1.61 percentage points from 62.41% for 2016, mainly due to the issuance of perpetual bonds of RMB3.0 billion as the
Company sought to improve its capital and debt structure.
The ratio was calculated as: total borrowings/total assets (whereas total borrowings represent borrowings due within one
year, borrowings due after one year, short-term commercial paper and medium and long-term notes and others).
XXXII. Going Concern Basis
The Company is a leading player in the paper making industry in China. After innovation and development for more than
half a century, it has developed into a large conglomerate principally engaged in paper making, finance, pulp and fibre
and mining businesses while also involved in forestry, logistics, construction materials, and others. It is also the only listed
company with A shares, B shares and H shares and preference shares in issue in China and the first company in the paper
making industry having a finance company and a financial leasing company integrated with its industrial activities in China.
The Group has production bases in Shandong, Guangdong, Hubei, Jiangxi and Jilin, which deliver annual pulp and paper
production capacity of over 10,000,000 tonnes.
The Company has good sustainable profitability. In 2017, the Company achieved revenue of RMB29.852 billion, net
profit attributable to shareholders of the Company of RMB3,769 million and net cash inflows from operating activities
of RMB25.186 billion. Meanwhile, the Company always places emphasis on the interests of and return to shareholders,
and has paid generous cash dividends for several years. With the improvement of the economic situation, the future
performance of the Company is worth looking forward to.
In addition, as at the end of December 2017, the Company obtained, from major financial institutions, comprehensive
credit facilities of RMB75,600 million, of which the unutilised credit facilities amounted to RMB27.9 billion, which provided
important support to the Company’s business development. As an A-share, B-share and H-share listed company,
the Company has convenient financing channels. The Company has established financial leasing companies, finance
companies and commercial factoring companies as the core of the financial segment. The rapid business development,
improving management system and effective risk control provide new sources of profit growth for the Company, further
increase the Group’s fund settlement, management, investment and financing ability, and reduce its financing cost while
improving its debt structure.
The auditors of the Company have prepared the 2017 annual financial report on a going concern basis, and have issued a
standard unqualified audit opinion (see Financial Report section).
Therefore, the Board believes the Company has the ability to continue as a going concern.
2017 ANNUAL REPORT
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OUTPUT: 27-03-2018 16:29:32
VII Material Matters
I. Profit distribution for ordinary shares of the Company and conversion of capital reserves into
share capital
Formulation, implementation or adjustment of profit distribution policy for ordinary shares, especially the
cash dividend during the reporting period
√ Applicable Not applicable
The Company implemented its profit distribution policy in strict compliance with the Articles of Association. Its cash
dividend policy was formulated and implemented in compliance with the requirements of the Articles of Association and the
resolution of the general meeting with well-defined and clear dividend distribution criteria and proportion. The legal interests
of the small shareholders were fully protected as the related decision making process and mechanism were in place,
the duties of independent Directors were well-defined so that they played a role, and the small shareholders were given
opportunities to sufficiently voice their opinion and make requests.
Implementation of the 2016 profit distribution plan for ordinary shareholders: Based on the number of the ordinary shares
as at the dividend distribution registration date of 1,936,405,467 shares, a cash dividend of RMB6 (tax inclusive) was
to be paid to all ordinary shareholders for every 10 shares held. The total cash dividend to be distributed amounted to
RMB1,161,843,280.20 (tax inclusive). The dividend distribution was implemented and completed on 16 June 2017. For
details, please refer to the announcement on payment of final dividend and withholding and payment of enterprise income
tax for non-resident enterprise shareholders published on the Hong Kong Stock Exchange on 1 June 2017, and the
announcement on the implementation of the 2016 profit distribution plan for A share and B share published on CNINFO on
9 June 2017.
Particulars of Cash Dividend Policy
Was it in compliance with the requirements of the Articles of Association
and the resolutions of the general meeting? Yes
Were the dividend distribution criteria and proportion well-defined and clear? Yes
Were the related decision-making process and mechanism in place? Yes
Did independent Directors fulfil their duties and play their role? Yes
Were the minority shareholders given opportunities to sufficiently voice their opinion
and make requests and were the legal interests of the minority shareholders fully protected? Yes
Were conditions and procedures legal and transparent in respect of
cash dividend policy with adjustments and changes? Yes
The dividend distribution plans for ordinary shares (proposed) and the proposals on conversion of capital
reserves into share capital (proposed) over the past three years (the reporting period inclusive)
(1) The 2017 profit distribution plan for ordinary shares
Based on the total ordinary share capital of 1,936,405,467 shares as at the end of 2017, a cash dividend of RMB6
(tax inclusive) per ten shares and a transfer of five shares for every ten shares from capital reserve to ordinary
shareholders, and RMB1,161,843,280.20, representing 30.82% of the consolidated net profit attributable to ordinary
shareholders of the Company, will be distributed to ordinary shareholders.
54 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:33
VII Material Matters
I. Profit distribution for ordinary shares of the Company and conversion of capital reserves into
share capital (Cont’d)
The dividend distribution plans for ordinary shares (proposed) and the proposals on conversion of capital
reserves into share capital (proposed) over the past three years (the reporting period inclusive) (Cont’d)
(2) The 2016 profit distribution plan for ordinary shares
The 2016 profit distribution plan was considered and approved in the 2016 annual general meeting convened by the
Company on 21 April 2017. Based on the number of the ordinary shares as at the dividend distribution registration
date of 1,936,405,467 shares, a cash dividend of RMB6.00 (tax inclusive) was to be paid to all ordinary shareholders
for every 10 shares held. The total cash dividend distributed during 2016 amounted to RMB1,161,843,280.20 (tax
inclusive).
(3) The 2015 profit distribution plan
The 2015 profit distribution plan was considered and approved in the 2015 annual general meeting convened by
the Company on 18 May 2016. Based on the number of the shares as at the dividend distribution registration date
of 1,936,405,467 shares, a cash dividend of RMB3.00 (tax inclusive) was to be paid to all shareholders for every 10
shares held. The total cash dividend distributed during 2015 amounted to RMB580,921,640.10 (tax inclusive).
Cash dividends for ordinary shares of the Company over the past three years (the reporting period inclusive)
Unit: RMB
As a
percentage
Net profit of net profit
attributable to attributable
ordinary to ordinary
shareholders of shareholders
the Company in of the Amount
the consolidated Company of cash Ratio of cash
financial in the dividends dividends
Amount of statements consolidated distribution distribution
cash dividends during the year financial through through
Year of distribution (tax inclusive) of distribution statements other means other means
2017 1,161,843,280.20 3,769,325,450.93 30.82% 0.00 0.00%
2016 1,161,843,280.20 1,998,578,788.75 58.13% 0.00 0.00%
2015 580,921,640.10 1,086,632,711.54 53.46% 0.00 0.00%
The Company made a profit and had positive retained profit available for ordinary shareholders of parent company
during the reporting period without cash dividend for ordinary shares being proposed
Applicable √ Not applicable
2017 ANNUAL REPORT 55
3704827-t01fnar (Shandong Chenming) p.55 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:33
VII Material Matters
II. Proposals on profit distribution and conversion of capital reserves into share capital during
this reporting period (including preference shares)
√ Applicable Not applicable
Numbers of bonus share per 10 shares (share(s))
Dividend distribution per 10 shares (RMB) (tax inclusive) Cash dividend of RMB6 (tax
inclusive) per 10 shares to ordinary
shareholders and cash dividend of
RMB6 (tax inclusive) per 10 simulated
shares converted from preference
shares into ordinary shares to holders
of preference shares
Conversion per 10 shares (share(s)) Converted every 10 shares of the
ordinary shareholders into 5 shares
by using capital reserve
Share base of the distribution proposal (shares) 1,936,405,467 ordinary shares
and 774,526,678 simulated shares
converted from preference shares
on a conversion ratio of 1 preference
share valued at RMB5.81; the share
base of the distribution proposal was
2,710,932,145 shares
Total cash dividend (RMB) (tax inclusive) 1,626,559,287.08
Distributable profits (RMB) 8,866,614,844.39
Percentage of cash dividend to total profits distribution 62.69%
Cash dividend policy
For profit distribution of companies which are fully developed with significant capital expenditure arrangement, the
percentage for cash dividend shall represent at least 40% of the profits distribution for the current year
Particulars of profit distribution and conversion of capital reserves into share capital
The audited consolidated net profit attributable to shareholders of the Company for 2017 prepared in accordance with
Accounting Standards for Business Enterprises by the Company amounted to RMB3,769,325,450.93. When deducting the
interest for perpetual bonds of RMB153,140,000 and dividend for preference shares of RMB333,702,107.35 for 2017, the
distributable profit realised for 2017 amounted to RMB3,282,483,343.58. In accordance with the requirements of the Articles
of Association and the Prospectus of Non-public Issuance of Preference Shares, the proposed profit distribution plan of the
Company for 2017 is as follows:
Based on the total ordinary share capital of 1,936,405,467 shares and the 774,526,678 simulated ordinary shares converted
from the preference shares using a conversion ratio of 1 share valued at RMB5.81 as at the end of 2017, a cash dividend of
RMB6 (tax inclusive) per ten shares will be distributed to ordinary shareholders; a cash dividend of RMB6 (tax inclusive) per
ten simulated ordinary shares converted from the preference shares will be distributed to holders of preference shares; and
a capitalisation issue will be made out of the capital reserves of 5 shares for every ten shares held to ordinary shareholders.
A cash dividend of RMB1,161,843,280.20 will be distributed to ordinary shareholders and a variable cash dividend of
RMB464,716,006.88 will be distributed to holders of preference shares. In other words, a cash dividend of RMB10.33 (tax
inclusive) per preference share with a nominal value of RMB100 each will be distributed to holders of preference shares.
56 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:33
VII Material Matters
III. Performance of undertakings
1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers,
shareholders, related parties, bidders and the Company during the reporting period or prior periods
but subsisting to the end of the reporting period
√ Applicable Not applicable
Undertaking Party involved in Type of Details of undertaking Undertaking date Term Particulars on the
undertaking undertaking performance
Undertaking on
shareholding structure
reformation
Undertaking made in
offering documents
or shareholding
alternation documents
Undertaking made during
asset reconstruction
Undertaking made on Shouguang Non-competitive (1) Shouguang Chenming Holdings Co., Ltd. 22 May 2008 During the period Implementing as
initial public offering Chenming Holdings undertaking (“Shouguang Chenming Holdings”) shall not engage, when Chenming normal
or refinancing Co., Ltd. whether solely, jointly, or by representing itself or any Holdings was the
other persons or companies, and shall not procure its major shareholder
associates (as defined in The Listing Rules of Hong of the Company
Kong Stock Exchange) to engage, in any business
which competes with the business of the Company and
its subsidiaries (“Chenming Group” or “we”) directly
or indirectly, in any country and region which our
business exists (or any part of the world if in any form of
electronics business), or in any business that directly or
indirectly competes with Chenming Group’s business
which we operate from time to time (including but not
limited to any business in the form of sole proprietorship,
joint ventures or acquisitions, or holding interests directly
or indirectly in such enterprises, or by any other means);
(2) in the event that Shouguang Chenming Holdings is
required by its business to, whether solely, jointly, or by
representing itself or any other persons or companies,
engage in business which directly or indirectly competes
against the business of Chenming Group, or obtain
any business opportunity which directly or indirectly
competes against the business of Chenming Group, it
shall endeavour to procure that Chenming Group shall
have priority to obtain the right to operate such business
or to obtain such business opportunity; (3) if Shouguang
Chenming Holdings is in breach of the abovementioned
undertakings, it shall indemnify the Company for any
loss caused by such breach and the Company shall
have the right to acquire all businesses of Shouguang
Chenming Holdings, which directly or indirectly compete
with the businesses of our Group, at market price or
cost price (whichever price is lower); (4) Shouguang
Chenming Holdings shall not make use of its position
as the controlling shareholder (as defined in The Listing
Rules of Hong Kong Stock Exchange) of our Group to
jeopardise the legal interests of Chenming Group and
its shareholders with other persons or companies or on
their behalf.
2017 ANNUAL REPORT
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OUTPUT: 27-03-2018 16:29:33
VII Material Matters
III. Performance of undertakings (Cont’d)
1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers,
shareholders, related parties, bidders and the Company during the reporting period or prior periods
but subsisting to the end of the reporting period (Cont’d)
Undertaking Party involved in Type of Details of undertaking Undertaking date Term Particulars on the
undertaking undertaking performance
Shouguang Defective properties (1) According to the plan on defective properties of the 16 January 2008 During the period Implementing as
Chenming Holdings Company, Shouguang Chenming Holdings Co., Ltd. when Chenming normal
Co., Ltd. (“Shouguang Chenming Holdings”) has guaranteed Holdings was the
and undertaken that: according to the application of major shareholder
the Company, for defective property(ies) owned by the of the Company
Company and its holding subsidiary company which
situated in the administrative area of Shouguang city,
Shouguang Chenming Holdings will purchase it (them)
and have it(them) being transferred to itself pursuant
to the law in accordance with the result of the related
asset valuation if the Company decides to transfer and
dispose of it(them) and there is no other transferee;
(2) before the Company transfers and disposes of the
defective properties pursuant to the law, if the Company
suffers any economic losses due to the defects of the
title (including but not limited to damages, penalties and
relocation costs), Shouguang Chenming Holdings will
bear such economic losses; (3) during the regulatory
process taken to the defective properties of buildings
and land of subsidiaries of the Company situated
outside the local areas (outside the administrative area of
Shouguang city), the economic losses such as penalties
or relocation costs imposed by competent administrative
authorities to be borne by the subsidiaries arising from
defects of insufficient title documents shall be paid
pursuant to the law by Shouguang Chenming Holdings
after verification.
Shandong Specific remedial In view of the impacts on dilution of current returns 25 March 2016 9999-12-31 Implementing as
Chenming Paper measures for for ordinary shareholders under the preference shares normal
Holdings Limited non-public issuance issuance, and in order to implement the Notice of
of preference shares the General Office of the State Council on Further
Strengthening Protection of the Lawful Rights of Small
Investors in Capital Markets, protect the interests
of ordinary shareholders and provide remedies for
the possible dilution on current returns as a result
of preference shares issuance, the Company has
undertaken that it will implement various measures
to ensure the effective utilisation of proceeds raised,
which can prevent dilution on current returns effectively,
thereby enhancing future returns.
58 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:33
VII Material Matters
III. Performance of undertakings (Cont’d)
1. Undertakings made by parties involved in undertakings including the Company’s beneficial controllers,
shareholders, related parties, bidders and the Company during the reporting period or prior periods
but subsisting to the end of the reporting period (Cont’d)
Undertaking Party involved in Type of Details of undertaking Undertaking date Term Particulars on the
undertaking undertaking performance
Equity incentive
undertakings
Other undertakings
made to the
Company’s minority
shareholders
Whether undertakings Yes
performed on time
Specific reasons why Not applicable
undertakings were not
performed on time
and next steps
2. Description on the Company’s assets and items in meeting original profit forecast and its explanation
as there is profit forecast for assets and items of the Company and the reporting period is still within
the profit forecast period
Applicable √ Not applicable
IV. Appropriation of funds of the Company by the controlling shareholder and its related parties
for non-operating purposes
Applicable √ Not applicable
There was no appropriation of funds of the Company by the controlling shareholder and its related parties for non-operating
purposes during the reporting period.
V. Opinions of the Board, the Supervisory Committee and independent Directors (if any)
regarding the “modified auditor’s report” for the reporting period issued by the accountants
Applicable √ Not applicable
VI. Reason for changes in accounting policies, accounting estimates and accounting methods
as compared to the financial report for the prior year
√ Applicable Not applicable
2017 ANNUAL REPORT
3704827-t01fnar (Shandong Chenming) p.59 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:33
VII Material Matters
(1) Change in accounting policies
Change of accounting policies due to the implementation of new Accounting Standard for Business Enterprises
On 28 April 2017, the Ministry of Finance issued the Accounting Standard for Business Enterprises No. 42 - Non-
current Assets Held-for-sale, Disposal Groups and Termination of Operations (Cai Kuai [2017] No. 13) which became
effective on 28 May 2017 for implementation. On 10 May 2017, the Ministry of Finance issued the Accounting
Standard for Business Enterprises No. 16 - Government Grants (Revised in 2017) (Cai Kuai [2017] No. 15) which
became effective on 12 June 2017 for implementation.
The Accounting Standard for Business Enterprises No. 42 - Non-current Assets, Disposal Groups for Sale and
Termination of Operations defines the classification, measurement and disclosure of non-current assets or disposal
groups for sale, and the disclosure of termination of operations. The financial statements have adjusted the disclosure
of the annual financial statements in the comparable year and the notes thereof with respect to the termination of
operations existed on the implementation date (28 May 2017) in accordance with the standard.
Prior to the implementation of the Accounting Standard for Business Enterprises No. 16 - Government Grants (Revised
in 2017), the Company included the government grants obtained in non-operating income or the government grants
related to assets in deferred income, and the average amortization is included in the profit or loss for the current
period. After the implementation of the Accounting Standard for Business Enterprises No. 16 - Government Grants
(Revised in 2017), the government grants related to daily activities after 1 January 2017 is recognized in other income,
if not, it is recognized in non-operating income or non-operating expenses.
60 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3704827-t01fnar (Shandong Chenming) p.60 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:33
VII Material Matters
(2) Change in accounting estimates
Unit: RMB
Details, reason and time of application of Procedure for
change in accounting estimates approval Items affected Amount affected
The debts arising from the financial leasing business 29 Resolved and Long-term Decreased by
of the Company’s subsidiary shall be provided for bad approved at the receivables RMB6,177,445.94
debts from at 5% to 10% to by the following ways from 19th extraordinary
December 2017: meeting of the
eighth session of
the Board on 29
December 2017
Individual assessment of impairment
When assessing the probability of recovery of lease receivables Loss on impairment Increased by
from a customer, the ability and willingness to pay lease payments, of assets RMB32,800,396.14
and the payment record of the customer, profitability of the lease
projects, and guarantees for leased assets will be analysed. If there
are evidences indicating that the customer is unable to repay and its
willingness to repay is not strong, and the principal and interest are
still not recoverable, or only a very small portion can be recovered,
after taking all possible measures or all necessary legal procedures,
the receivables are subject to individual impairment assessment, and
the difference between the present value of the future cash flows
expected to be derived from the receivables and the carrying amount
shall be accounted for as provision for bad debts and recognised in
profit or loss.
Collective assessment of impairment based on credit risk
characteristics
At the end of the period, each individual leasing contract is classified Non-current assets Increased by
based on the amount past due and recovery, and the major basis for due within one year RMB45,914,608.78
classification and provision for impairment are as follows:
Category Basis for classification Proportion
of provision (%)
Normal Not yet past due 0.30
Overdue 180 days past due 5.00
181- 365 days past 10.00
due (inclusive)
1-3 years past 30.00
due (inclusive)
3- 5 years past 50.00
due (inclusive)
Over 5 years past due 100.00
No bad debt provision will be made for lease receivables from related Other current assets Decreased by
parties unless there is objective evidence that the Company is unable RMB172,537,558.98
to recover the lease receivables from related parties.
If there is objective evidence that the lease receivables from related
parties are recovered and can be linked objectively to an event
occurring after the write-down, the impairment losses recognised will
be reversed and accounted for in profit or loss. The carrying amount
reversed shall not exceed the assumed amortised costs on the date
of reversal of the lease receivables had no impairment provision been
made.
2017 ANNUAL REPORT 61
3704827-t01fnar (Shandong Chenming) p.61 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:33
VII Material Matters
VII. Reason for retrospective restatement to correct major accounting errors during the reporting
period
Applicable √ Not applicable
Unit: RMB
The name of the
report projects
during the periods
of comparison Cumulative
The contents of the correction of accounting errors. Procedure affected impacted number
Zhanjiang Chenming Pulp & Paper Co., Ltd., a subsidiary of the Company, Correction of financial Income tax expense Increased by
applied for high-tech enterprise certification in 2015. The company received statement for 2016 (year 2016) RMB65,408,033.50
the high-tech enterprise certificate on 28 March 2016 and issued a public
announcement. The company’s annual report was announced on 30 Initial undistributed Decreased by
March 2016, which is very close to the time that the company received the profit (1 January RMB65,408,033.50
certificate, thus in 2015, Zhanjiang Chenming was still withholding tax at a 2016)
25% income tax rate. In May 2016, when Zhanjiang Chenming settled the
annual income tax for 2015, the tax authorities approved that the income
tax may be paid at the rate of 15% for 2015. In addition, the tax authorities
also refunded the overpaid taxes of RMB 65,952,632.95 in August 2016.
The company directly offset the current income tax expense for 2016 after
receiving it. As a result, there was an error in the amount of income tax
for 2015 and 2016, but in this year, the company has made corrections to
previous mistakes. In 2015, the company prepaid income tax at a rate of
15%, which would reduce the deferred income tax assets of RMB 544,599.45
as of 31 December 2015, and reduce the income tax expenses of RMB
65,408,033.50 for the year of 2015 (among which, the current income tax
expense was reduced by RMB 65,952,632.95, and the deferred income tax
expense increased by RMB 544,599.45).
62 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3704827-t01fnar (Shandong Chenming) p.62 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:33
VII Material Matters
VIII. Reason for changes in scope of the consolidated financial statements as compared to the
financial report for the prior year
√ Applicable Not applicable
Business combinations not under common control
Revenue of Net profit of
acquiree from acquiree from
Equity the acquisition the acquisition
Point of time acquisition Equity Equity Basis for the date to the end date to the end
of equity costs acquisition acquisition Acquisition acquisition of the period of the period
Name of acquiree acquisition (RMB’0000) proportion (%) mode date date (RMB) (RMB)
2017.10 159,064.67 45.00 Merger and 2017.11.1 Date of 485,784.40 -36,856,878.73
Shanghai Hongtai Real acquisition substantive
Estate Co., Ltd. control
Changes in scope of consolidation due to other reasons
During the year, the scope of consolidation included 9 newly established subsidiaries, namely Shanghai Chenming
Industry Co., Ltd., Shanghai Chenming Financial Leasing Co., Ltd., Guangzhou Chenming Financial Leasing Co.,
Ltd., Shandong Chenming Commercial Factoring Co., Ltd., Guangzhou Chenming Commercial Factoring Co., Ltd.,
Qingdao Chenming Pulp and Paper Electronic Commodity Exchange Co., Ltd., Xuchang Chenming Paper Co., Ltd.,
Chengdu Chenming Culture Communication Co., Ltd. and Beijing Chenming Culture Communication Co., Ltd.
During the year, the scope of consolidation excluded 2 companies: a former subsidiary, namely Shouguang Chenming
Hongxin Packaging Co., Ltd was deregistered upon merger and acquisition by another subsidiary Shouguang
Hongxiang Printing and Packaging Co., Ltd, whereas Jilin Chenming Machinery Manufacturing Co., Limited was
transferred.
IX. Engagement or dismissal of accounting firms
Current accounting firm engaged
Name of the domestic accounting firm Ruihua Certified Public Accountants
(Special General Partnership)
Remuneration of the domestic accounting firm (RMB ‘0,000)
Continued term of service of the domestic accounting firm
Name of certified public accountants of the domestic accounting firm Zhao Yanmei and Wang Zongpei
Whether to appoint another accounting firm during the period
Continued term of service of certified public accountants of the
domestic accounting firm
Yes √ No
Particulars on recruitment of accounting firms, financial consultants or sponsors for internal control and auditing purposes
√ Applicable Not applicable
1. In 2017, the Company engaged Ruihua Certified Public Accountants as the internal control and auditing firm of the
Company. The Company paid RMB600,000 as internal control and auditing fees during the period;
2. In 2017, the Company engaged King & Wood Mallesons (Qingdao) Law Firm as its regular legal advisor and paid
RMB100,000 as legal advisory fees during the period;
3. Due to the working requirements for the non-public issuance of A shares, the Company engaged CSC Financial Co.,
Ltd. as the sponsor for the non-public issuance. The term for ongoing supervisory will be expired on 31 December
2017.
2017 ANNUAL REPORT
3704827-t01fnar (Shandong Chenming) p.63 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:33
VII Material Matters
X. Suspension in trading or delisting upon publication of annual report
Applicable √ Not applicable
XI. Matters related to bankruptcy and reorganisation
Applicable √ Not applicable
There was no matter related to bankruptcy and reorganisation during the reporting period.
64 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3704827-t01fnar (Shandong Chenming) p.64 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XII. Material litigation and arbitration
√ Applicable Not applicable
Judgment
execution of
Basic information about Amount Will liability Judgment result of the litigation the litigation
litigation (arbitration) (RMB’0,000) be incurred Progress of litigation (arbitration) (arbitration) and its effect (arbitration) Disclosure date Disclosure index
Statutory demand and RMB167.86 million and Yes 1 The Court of First Instance in the 1. The office address of the Company Not applicable 25 February 2017, http://www.cninfo.com.cn,
Winding-up Petition the interest thereon, High Court of the HKSAR completed in Hong Kong received the notice in 17 July 2017, 20 October announcement number: 2017-015,
USB3,548.9 thousand the hearing held from 21 February relation to the injunction order with 2017, 29 August 2017, 2017-067, 2017-069, 2017-070,
and the interest thereon, 2017 to 23 February 2017. a case number of HCMP3060/2016 12 September 2017, 2017-071, 2017-076, 2017-084,
HK$ 3303.9 thousand to the legal representative of the 20 October 2017 2017-128, 2017-103, 2017-106,
and the interest thereon 2. The office address of the Company Company from the Court of First 2017-[]
in Hong Kong received the notice in Instance in the High Court of the
relation to the injunction order with HKSAR on 15 June 2017: (1) the
a case number of HCMP3060/2016 amended originating summonses for
to the legal representative of the the injunction order be dismissed;
Company from the Court of First and (2) an order nisi be made on
Instance in the High Court of the the costs of the legal proceedings.
HKSAR on 15 June 2017. The Company paid the costs to
the defendant (including the fees
3. On 26 June 2017, there was an ex-
payable to two counsels). The
parte hearing in chambers in the
costs shall be taxed if not agreed.
High Court of the HKSAR in which
The High Court of the HKSAR
the petitioner applied for an interim
anticipated the reasons for decision
injunction order to prohibit the
of the case would be handed down
Company from distribution of the
on 7 July 2017.
2016 final dividend to the holders of
H shares. 2. On 15 June 2017, the office address
of the Company in Hong Kong
4. On 30 June 2017, the Hon Mr.
received a winding-up petition
Justice Harris of the High Court of
dated 15 June 2017 filed by the
the HKSAR discharged the interim
defendant to the High Court of the
injunction order on the same date
HKSAR.
after the hearing.
3. The decision was handed down by
5. The decision was handed down by
the Hon Mr. Justice Harris of the
the Hon Mr. Justice Harris of the
High Court of the HKSAR on 7 July
High Court of the HKSAR on 7 July
2017.
2017.
4. Having considered the reasons for
6. The winding-up petition was
decision and the consequences
scheduled to be heard before the
to the Company once the winding
High Court of the HKSAR at 9:30
up petition is given, the Company
a.m. on 23 August 2017.
applied for an appeal against
7. The Company through its legal the decision to the High Court
adviser applied to the Court of of HKSAR on 12 July 2017. The
HKSAR for the validation order hearing was scheduled to be heard
relating to the transfer of fully before the Court of Appeal of the
paid-up shares of the Company High Court of the HKSAR at 10:00
on 19 July 2017 (case no. am on 11 May 2018.
HCCW175/2017). The hearing of the
5. The High Court of HKSAR granted
application of the validation order
the Validation Order to the
was scheduled to be heard at 9:30
Company. Therefore, the transfer of
a.m. on 19 October 2017.
fully paid-up shares of the Company
8. The winding-up petition was heard since the Winding Up Petition (i.e.
by the Hon Mr. Justice Harris of 15 June 2017) would not be deemed
the High Court of the HKSAR on 28 void because of the Winding Up
August 2017. Petition.
2017 ANNUAL REPORT
3704827-t01fnar (Shandong Chenming) p.65 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XII. Material litigation and arbitration (Cont’d)
Judgment
execution of
Basic information about Amount Will liability Judgment result of the litigation the litigation
litigation (arbitration) (RMB’0,000) be incurred Progress of litigation (arbitration) (arbitration) and its effect (arbitration) Disclosure date Disclosure index
9. On 5 July 2017, the Company 6. The Court ordered an adjournment
initiated legal proceedings for a of the Winding-up Petition, on
civil complaint against Arjowiggins the Company’s undertaking that
HKK2 Limited (“HKK2”) and related it would procure a third party to
parties (the “Civil Complaint”) at pay into court the amount of the
the Intermediate People’s Court Statutory Demand plus interest
of Weifang City in Shandong to 27 August 2018, totalling
Province of the People’s Republic approximately HK$389 million within
of China (“Weifang Court”). The Civil 14 days. The costs of the Winding-
Complaint was admitted to be heard up Petition were kept.
by Weifang Court on 8 July 2017.
7. The Company had procured
Justice Mimmie Chan of the Court payment by a third party into the
of First Instance of the High Court of High Court of the HKSAR in the
the HKSAR on 19 January 2018 in sum of HK$389,112,432.44 (this
chambers (open to public) ordered sum being the Hong Kong dollar
that the Company be restrained equivalent of the amount set out in
from further proceeding with the the Statutory Demand and interest
Civil Complaint that it had filed thereon from 19 October 2016 to 27
on 5 July 2017 against HKK2 and August 2018).
the related parties before Weifang
Court.
The Company withdrew the Civil
Complaint from Weifang Court on
22 February 2018.
XIII. Punishment and rectification
Applicable √ Not applicable
There was no punishment and rectification of the Company during the reporting period.
XIV. Credibility of the Company, its controlling shareholders and beneficial controllers
Applicable √ Not applicable
XV. Implementation of the equity incentive plan, employee shareholding plan or other employee
incentive measure of the Company
Applicable √ Not applicable
There was no implementation of the equity incentive plan, employee shareholding plan or other employee incentive measure
of the Company during the reporting period.
66 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3704827-t01fnar (Shandong Chenming) p.66 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XVI. Significant related party transactions
1. Related party transactions associated with day-to-day operation
√ Applicable Not applicable
Percentage
Subject Pricing basis Amount of as the amount Amount of Market price
Types of the matter of the of the related Price of related party of similar transactions Whether Settlement of of available
Related party related party related party party related party transactions transactions approved exceeding related party similar Disclosure
Related party relationship transactions transactions transactions transactions (RMB’0,000) (%) (RMB’0,000) approved cap transactions transaction date Disclosure index
Jiangxi Chenming Natural Pursuant to the requirement Procurement Natural gas, Market price Market price 14,767.27 0.75% 35,000 No Bank acceptance Not applicable 18 February http://www.cninfo.
Gas Co., Ltd under Paragraph (2) of heavy oil etc. and telegraphic 2017 com.cn
Article 10.1.6 of the transfer
Rules Governing the
Listing of Stocks on
Shenzhen Stock Exchange
Total — — 14,767.27 — 35,000 — — — — —
Particulars on refund of bulk sale No
2. Related party transaction in connection with purchase or sale of assets or equity interest
Applicable √ Not applicable
There was no related party transaction of the Company in connection with purchase or sale of assets or equity interest
during the reporting period.
3. Related party transaction connected to joint external investment
Applicable √ Not applicable
There was no related party transaction of the Company connected to joint external investment during the reporting
period.
2017 ANNUAL REPORT
3704827-t01fnar (Shandong Chenming) p.67 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XVI. Significant related party transactions (Cont’d)
4. Related creditors’ rights and debts transactions
√ Applicable Not applicable
Was there any non-operating related creditors’ rights and debts transaction?
√ Yes No
Debts payable to any related party:
Amount Amount
Any appropriation increased recovered
of funds for Opening during the during the Interest for the
Relationship with non-operating balance current period current period current period
Related party the Company Reason purposes (RMB’0,000) (RMB’0,000) (RMB’0,000) Interest rate (RMB’0,000)
Shouguang Chenming Controlling shareholder Provision of financial support 0 1,996,093,650.42 1,996,093,650.42 0.00% 0
Holdings Company Limited to the Company from the
controlling shareholder
Shouguang Hengtai Enterprise A company controlled by Provision of financial support 4,037.27 0 0 4.35% 181.70% 4,218.97
Investment Company Limited some directors and Senior from Hengtai Investment and
Management members of the Company on the same
the Company proportion of shareholdings in
Haiming Mining.
Effect of related debts on the operating results and The related debts are financial support to the Company and its subsidiaries from Chenming Holdings and Hengtai Investment to help ease the financial
financial position of the Company pressure on the Company and its subsidiaries and promote the operation and production of the Company and its subsidiaries.
5. Other significant related party transactions
Applicable √ Not applicable
There was no other significant related party transaction of the Company during the reporting period.
68 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3704827-t01fnar (Shandong Chenming) p.68 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XVII. Material contracts and implementation
1. Custody, contracting and leasing
(1) Custody
Applicable √ Not applicable
There was no custody of the Company during the reporting period.
(2) Contracting
Applicable √ Not applicable
There was no contracting of the Company during the reporting period.
(3) Leasing
Applicable √ Not applicable
There was no leasing of the Company during the reporting period.
2. Significant guarantees
√ Applicable Not applicable
(1) Guarantees
During the reporting period, the Company provided guarantee to Weifang Sime Darby West Port Co., Ltd., a
joint venture and the guarantee amount incurred was RMB50.00 million. The Company provided guarantee
to subsidiaries and the guarantee amount incurred was RMB12,860.0440 million. The subsidiaries provided
guarantee to their subsidiaries and the guarantee amount incurred was RMB1,851.2499 million.
As at 31 December 2017, the balance of the external guarantee provided by the Company (including the
guarantee to its subsidiaries by the Company and the guarantee provided to subsidiaries by subsidiaries)
amounted to RMB18,452.7438 million, representing 66.43% of the equity attributable to shareholders of the
Company as at the end of 2017.
The Company did not provide any guarantee to external parties (excluding the guarantee provided to its
subsidiaries and investees and the guarantee provided to subsidiaries by subsidiaries) and did not provide any
guarantee against the rules and regulations.
Unit: RMB’0,000
External guarantees of the Company and its subsidiaries (excluding guarantees to subsidiaries)
Date of the related Guarantee
announcement to related
disclosing the Amount of Guarantee date Guarantee Fulfilled parties
Name of obligee guarantee amount guarantee (agreement date) provided Type of guarantee Term or not or not
Weifang Sime Darby West Port Co., Ltd. 24 July 2017 17,500 5,000 General guarantee 10 years No No
Total external guarantees approved during the reporting period (A1) 17,500 Total actual external guarantees during the reporting period (A2) 5,000
Total external guarantees approved at the end of the reporting period (A3) 17,500 Balance of total actual guarantees at the end of the reporting period (A4) 5,000
2017 ANNUAL REPORT
3704827-t01fnar (Shandong Chenming) p.69 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
2. Significant guarantees (Cont’d)
(1) Guarantees (Cont’d)
Guarantees between the Company and its subsidiaries
Date of the related Guarantee
announcement to related
disclosing the Amount of Guarantee date Guarantee parties
Name of obligee guarantee amount guarantee (agreement date) provided Type of guarantee Term Fulfilled or not or not
Zhanjiang Chenming Pulp & Paper Co., Ltd. 30 March 2016 150,000 General guarantee 3 years No No
Zhanjiang Chenming Pulp & Paper Co., Ltd. 17 February 2017 650,000 342,060.64 General guarantee 3 years No No
Shandong Chenming Financial Leasing Co., Ltd. 26 March 2015 500,000 224,968.29 General guarantee 7 years No No
Shandong Chenming Financial Leasing Co., Ltd. 30 March 2016 300,000 General guarantee 7 years No No
Huanggang Chenming Arboriculture Development Co., Ltd. 17 February 2017 5,000 General guarantee 3 years No No
Huanggang Chenming Pulp & Paper Co., Ltd. 26 March 2015 400,000 116,161.34 General guarantee 7 years No No
Huanggang Chenming Pulp & Paper Co., Ltd. 30 March 2016 550,000 General guarantee 7 years No No
Jiangxi Chenming Paper Co., Ltd. 30 March 2016 150,000 91,467.48 General guarantee 3 years No No
Jiangxi Chenming Paper Co., Ltd. 17 February 2017 200,000 General guarantee 3 years No No
Shouguang Meilun Paper Co., Ltd. 16 December 2010 600,000 50,000 General guarantee 10 years No No
Shouguang Meilun Paper Co., Ltd. 17 February 2017 100,000 General guarantee 3 years No No
Shandong Chenming Paper Sales Company Limited 30 March 2016 200,000 General guarantee 3 years No No
Shandong Chenming Paper Sales Company Limited 17 February 2017 400,000 342,479.49 General guarantee 3 years No No
Chenming (HK) Limited 30 March 2016 100,000 General guarantee 3 years No No
Chenming (HK) Limited 17 February 2017 500,000 470,012.15 General guarantee 3 years No No
Shouguang Chenming Import and Export Trade Co., Ltd. 17 February 2017 50,000 18,000 General guarantee 3 years No No
Jilin Chenming Paper Co., Ltd. 17 February 2017 150,000 General guarantee 3 years No No
Shandong Chenming Group Finance Co., Ltd. 17 February 2017 500,000 General guarantee 3 years No No
Zhanjiang Chenming Arboriculture Development Co., Ltd. 17 February 2017 5,000 General guarantee 3 years No No
Nanchang Chenming Arboriculture Development Co., Ltd. 15 August 2017 10,000 General guarantee 3 years No No
Total amount of guarantee provided for subsidiaries approved during 2,570,000 Total amount of guarantee provided for subsidiaries during the reporting period (B2) 1,286,004.40
the reporting period (B1)
Total amount of guarantee provided for subsidiaries approved as at 5,520,000 Total balance of guarantee provided for subsidiaries as at the end of the reporting 1,655,149.38
the end of the reporting period (B3) period (B4)
Guarantees between subsidiaries
Date of the related Guarantee
announcement to related
disclosing the Amount of Guarantee date Guarantee Fulfilled parties
Name of obligee guarantee amount guarantee (agreement date) provided Type of guarantee Term or not or not
Chenming (HK) Limited 30 March 2016 100,000 99,620.41 General guarantee 3 years No No
Chenming (HK) Limited 30 March 2016 100,000 85,504.58 General guarantee 3 years No No
Chenming (HK) Limited 30 March 2016 100,000 General guarantee 3 years No No
Total amount of guarantee provided for subsidiaries approved during 0 Total amount of guarantee provided for subsidiaries during the reporting period (C2) 185,124.99
the reporting period (C1)
Total amount of guarantee provided for subsidiaries approved as at 300,000 Total balance of guarantee provided for subsidiaries as at the end of the reporting 185,124.99
the end of the reporting period (C3) period (C4)
Total amount of guarantee provided (i.e. sum of the above three guarantee amount)
Total amount of guarantee approved during the reporting period (A1+B1+C1) 2,587,500 Total amount of guarantee during the reporting period (A2+B2+C2) 1,476,129.39
Total amount of guarantee approved as at the end of the reporting period (A3+B3+C3) 5,837,500 Total balance of guarantee as at the end of the reporting period (A4+B4+C4) 1,845,274.37
The percentage of total amount of guarantee provided (i.e. A4+B4+C4) to 66.43%
the net assets of the Company
Of which:
Balance of guarantee provided for shareholders, beneficial controllers
and its related parties (D)
Balance of guarantee directly or indirectly provided for obligors 1,240,584.92
with gearing ratio over 70% (E)
Total amount of guarantee provided in excess of 50% of net assets (F) 604,689.45
Sum of the above three amount of guarantee (D+E+F) 1,845,274.37
70 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3704827-t01fnar (Shandong Chenming) p.70 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
2. Significant guarantees (Cont’d)
(2) External guarantees against the rules and regulations
Applicable √ Not applicable
There was no external guarantee provided by the Company which was against the rules and regulations during
the reporting period.
3. Entrusted cash and asset management
(1) Entrusted wealth management
Applicable √ Not applicable
The Company did not have any entrusted wealth management during the reporting period.
(2) Entrusted loans
√ Applicable Not applicable
Entrusted loans during the reporting period
During the reporting period, the Company did not have other entrusted loans except for the entrusted loans
of RMB900 million recovered from Shouguang Jin Choi Public Assets Management Co., Ltd. according to the
agreement.
The specific circumstances of a high-risk entrusted loan with single significant amount or low security, poor
liquidity, and no principal protection.
Unit: RMB’0,000
Actual gains
Actual gains or losses Summary of
or losses recovered events and
Expected during the during the Impairment Statutory Any entrusted related
Types of Interest rate Sources of Commencement return reporting reporting provision procedure loan plan search
Borrower borrower of loans Loan amount funds date Expiry date (if any) period period (if any) passed in the future index (if any)
Shouguang Jin Choi Local
Public Assets government http://www.
Management Co., Ltd. platform Self-owned 17 January Recovered on cninfo.com.
company 10.00% 50,000 funds 18 January 2014 2017 375.00 time 0 Yes No cn/
Shouguang Jin Choi Local
Public Assets government http://www.
Management Co., Ltd. platform Self-owned Recovered on cninfo.com.
company 10.00% 40,000 funds 18 April 2014 18 April 2017 1,311.11 time 0 Yes No cn/
Total 90,000 — — — 1,686.11 — — — —
Unable to recover the principal of entrusted loans or other circumstances that may result in impairment
Applicable √ Not applicable
2017 ANNUAL REPORT
3704827-t01fnar (Shandong Chenming) p.71 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XVII. Material contracts and implementation (Cont’d)
4. Other material contracts
Applicable √ Not applicable
The Company did not have any other material contract during the reporting period.
XVIII. Fulfilment of Social Responsibility
1. Fulfilment of social responsibility (Cont’d)
The state is the strongest support for the development of Chenming, while the society is the greatest origin for
Chenming’s development and growth. During its development for more than half a century, Chenming has always
adhered to its philosophy of “building the country through industry development and paying back to society”. It has
voluntary performed its social responsibility, and cultivated the “tree of responsibility”, which has already achieved
fruitful results.
The Company has established its corporate governance structure in accordance with the requirements of the
Companies Law, Securities Law, Articles of Association and other relevant laws and regulations and the actual
situation of the Company. There is a clear separation of powers and responsibilities between the general meeting,
the Board, the Supervisory Committee and the management which is accountable to the general manager. The
management system under the structure is characterised by a mechanism of checks and balances of a legal person
with separation of ownership and operation, separation of the decision-making, execution and supervisory powers,
as well as the co-existence of the general meeting, the Board and the Supervisory Committee. Strict provisions on
the rights, duties and responsibilities of the general meeting, the Board, the Supervisory Committee and general
managers have been stipulated. The Company has placed great emphasis on fulfilment of social responsibility and
goes beyond the concept of “profit as the only goal”. While creating value for shareholders during the process of
production, operation and business development, the Company, in line with the development of the State and the
society, has strived to reach a compromise between economic benefits and social benefits, short-term benefits and
long-term benefits, as well as corporate development and social development, with the aim to achieve a healthy and
harmonious development between the Company and its employees, the Company and the society, and the Company
and the environment.
Centring the corporate mission of “Creating Sharing Culture within Chenming and Achieving Win-Win Situation”, the
core value of “Good Faith, Win-Win and Sharing”, the corporate spirit of “Learning, Surpass and Leading” as well
as the human resources philosophy of “Providing Staff Trainings, Recruiting Talents, Allocating Human Resources
Properly and Retaining Talents”, the Company has established its own corporate culture, which has become the spirit
and driver for the sustainable and health development of the Company.
The Company strives to the development path of new type industrialisation with high technology contents, low
energy consumption and less pollution. It puts great efforts in the implementation of green low-carbon strategy. In
addition, the Company endeavours to facilitate business development in line with ecological development, enhance
its competitiveness in economic development and environmental protection, and establish its economic and
ecological culture. It also seeks for development while protecting the environment and maintains higher environmental
protection while seeking for scientific development, thus achieving “win-win” situation in economic development
and environmental protection. The Company has strictly in compliance with relevant environmental protection
policies, laws and regulations in China. It has mitigated the impact on environment through industrial optimisation
and upgrade, reduced resources utilisation through innovative operation, and implemented strict management with
the concept of environmental protection and safety operation being penetrated into every procedure in production
and operation, thereby promoting the harmonious development between the people and the Company, as well as
that of the Company and the environment. The Company is the first in the industry in China which passes ISO14001
environmental management system certification. The Company has been named the environmental friendly enterprise,
the recycling economy exemplary enterprise, the outstanding water efficiency unit and the outstanding unit in
comprehensive utilisation of resources of Shandong province.
72 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XVIII. Fulfilment of Social Responsibility
1. Fulfilment of social responsibility (Cont’d)
Leveraging its advanced production technology and manufacture equipment, extensive experience in waste treatment
and various comprehensive treatment systems, the Company strives to implement horizontal and vertical control
throughout its production processes, thus achieving low carbon emission through low energy consumption, as well
as reduction of use of resources through recycling. The Company has passed the clean production assessment
organised by United Nations Development Programme in May 1999. The Company focuses on its works in various
aspects, including the establishment of eco-friendly energy consumption system, implementation of on-site 6S
management, launch of environmental protection and hazard inspection works, wide application of new energy
conservation and emission reduction technology, promotion of key energy conservation and emission reduction
projects, enhancement of innovative technology, promotion of the industrialisation of comprehensive resources
utilisation, implementation of scientific proposal on “multi-usage of water” based on the quality, quantity and working
procedure, as well as strengthening of the awareness on energy saving and environmental protection of all staff and
habit building. Hence, the Company has achieved whole process control and management over clean and efficient
production.
The Company has strictly implemented in-depth corporate governance. It has put great efforts and huge investments
in promoting the management of “the three wastes” so as to facilitate energy conservation and emission reduction,
aiming to become a low energy consumption and environment friendly enterprise. In respect of waste water
treatment, the Company has established world-class waste water treatment system. It has over 10 waste water
treatment facilities for various purposes, with the most advanced treatment technology in domestic and overseas
market being adopted. Hence, the Company has realised the comprehensive integration and upgrade of waste water
treatment facilities in plants, with different emission indicators better than relevant regulatory benchmark. In respect
of solid waste treatment, the Company has discontinued the traditional landfilling treatment. It has enhanced its
technology innovation, strengthened comprehensive resources utilisation, as well as expanded its industrial chain,
thereby achieving recycling and harmless utilisation of solid wastes. In respect of waste gas treatment, the Company
has introduced advanced international environmental protection equipment and technology for desulphurisation,
denitrification and de-dusting, smelly gas treatment and closure of coal plants. It has adopted scientific waste gas
treatment as to ensure our waste gas emission is in compliance with all relevant environmental protection standards
and requirements in China.
The Company strives to create a wealthy society. It has offered more job vacancies, thereby contributing more
taxes to the government, and sharing the achievements of the Company with our staff and society. While caring our
staff sincerely and building up a harmonious relationship with the staff, the Company also greatly supports different
charity programmes. Over the past few years, the Company has donated tens of millions to Shouguang Education
Fund, Shouguang Charity Federation, Weifang Venture Association, Shandong Red Cross and districts suffered from
earthquake, which reflects the outstanding contribution of the Company to building a harmonious society in China.
The Company has been honoured with the title of “Most Caring Donating Enterprise” by Weifang and Shouguang
Municipal Committee and Municipal Government for serval times, while our chairman Mr. Chen Hongguo has been
honoured with the title of “Most Caring Person”.
2. Fulfilment of social responsibility regarding targeted poverty relief
Applicable √ Not applicable
2017 ANNUAL REPORT
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OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
3. Environmental protection matters
Are the Company and its subsidiaries classified as key pollutant discharging unit as specified by environmental
protection authority?
Yes
Name of major Pollutant
pollutants Number of emission
Name of company and specific Way of emission Distribution of Emission standards Approved total Excessive
or subsidiary pollutants emission outlets emission outlets concentration implemented Total emissions emissions emissions
Shandong Chenming COD Organised 3 Within Chenming 200mg/L 300mg/L 4547t 7666.64t No
Paper Holdings Limited emission Industrial Park
Ammonia nitrogen Organised 3 Within Chenming 2.90mg/L 45 mg/L 58.40t 766.66t No
emission Industrial Park
Sulphur dioxide Organised 2 Within Chenming 4.70mg/m3 35mg/m3 17.22t 247.16t No
emission Industrial Park
Nitrogen oxide Organised 2 Within Chenming 48.05mg/m3 100 mg/m3 163.10t 941.81t No
emission Industrial Park
Smoke Organised 2 Within Chenming 0.64 mg/m3 10 mg/m3 12.91t 70.62t No
emission Industrial Park
Shouguang Meiun Sulphur dioxide Organised 2 Within Chenming 4.87mg/m3 35mg/m3 55.30t 348.10t No
Paper Co., Ltd. emission Industrial Park
Nitrogen oxide Organised 2 Within Chenming 48.35mg/m3 100 mg/m3 464t 709.32t No
emission Industrial Park
Smoke Organised 2 Within Chenming 0.58mg/m3 5mg/m3 30.80t 73.62t No
emission Industrial Park
Wuhan Chenming Hanyang COD Organised 1 East of the 33.97mg/l 80mg/L 40.47t 184.30t No
Paper Holdings Co., Ltd. emission factory area
Ammonia nitrogen Organised 1 East of the 0.45mg/l 8 mg/L 0.53t 17.30t No
emission factory area
Wuhan Chenming Qianneng Sulphur dioxide Organised 2 Within Qianneng 13mg/m3 50mg/m3 32.95t 102.58t No
Electric Power Co., Ltd. emission Electric Power
factory area
Nitrogen oxide Organised 2 Within Qianneng 25mg/m3 100 mg/m3 77.21t 205.16t Nitrogen oxide
emission Electric Power emission
factory area exceeded the
standards in
the first quarter
of 2017 due
to changes
in emission
standards.
Smoke Organised 2 Within Qianneng 15mg/m3 20mg/m3 14.47t 41.03t No
emission Electric Power
factory area
Jiangxi Chenming Paper COD Organised 1 At the boundary 45mg/L 90mg/L 584.62t 1260t No
Co., Ltd. emission of factory area
Ammonia nitrogen Organised 1 At the boundary 1.5mg/L 8mg/L 48.78t 112t No
emission of factory area
Sulphur dioxide Organised 2 Within factory area 60mg/m3 200mg/m3 446.06t 806t No
emission
Nitrogen oxide Organised 2 Within factory area 100mg/m3 200 mg/m3 715.35t 806t No
emission
Smoke Organised 2 Within factory area 15mg/m3 30mg/m3 115.73t 135t No
emission
74 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
3. Environmental protection matters (Cont’d)
Name of major Pollutant
pollutants Number of emission
Name of company and specific Way of emission Distribution of Emission standards Approved total Excessive
or subsidiary pollutants emission outlets emission outlets concentration implemented Total emissions emissions emissions
Jilin Chenming Paper COD Organised 1 At the boundary 61.70mg/L 90mg/L 315t 357t No
Co., Ltd. emission of factory area
Ammonia nitrogen Organised 1 At the boundary 1.02mg/L 8mg/L 5.41t 34t No
emission of factory area
Sulphur dioxide Organised 1 Within factory area 34.30mg/m3 100mg/m3 53.28t 97t No
emission
Nitrogen oxide Organised 1 Within factory area 54.90mg/m3 100mg/m3 73.16t 213t No
emission
Smoke Organised 1 Within factory area 13.65mg/m3 30mg/m3 23.51t 51.66t No
emission
Zhanjiang Chenming COD Organised 1 Within Zhanjiang 63mg/L 90mg/L 1311.90t 1943t No
Pulp & Paper Co., Ltd. emission Chenming
factory area
Ammonia nitrogen Organised 1 Within Zhanjiang 1.53mg/L 8mg/L 39t 43.90t No
emission Chenming
factory area
Smoke Organised 6 Within Zhanjiang Lime kiln Lime kiln 80mg/ 165.75t 196t No
emission Chenming 21.96mg/m3; m3; Alkali
factory area Alkali recovered recovered
18.60mg/m3; 30mg/m3; 1#—
1#—3# circulating 3# circulating
fluidised bed fluidised bed
boiler 5.83mg/ boiler30mg/m3;
m3; 4# circulating 4# circulating
fluidised bed fluidised bed
boiler2.63mg/m3 boiler10mg/m3
Sulphur dioxide Organised 6 Within Zhanjiang Lime kiln Lime kiln 160.65t 620t No
emission Chenming 1.67mg/m3; 400mg/m3;
factory area Alkali recovered Alkali recovered
22.87mg/m3; 200mg/m3; 1#—
1#—3# circulating 3# circulating
fluidised bed fluidised bed
boiler 4.63mg/ boiler 100mg/
m3; 4# circulating m3; 4# circulating
fluidised bed fluidised bed
boiler2.47mg/m3 boiler35mg/m3
Nitrogen oxide Organised 6 Within Zhanjiang Lime kiln Lime kiln 1588.60t 2169.70t No
emission Chenming 198.95mg/m3; 300mg/m3;
factory area Alkali recovered Alkali recovered
192.10mg/m3; 200mg/m3; 1#—
1#—3# circulating 3# circulating
fluidised bed fluidised bed
boiler 6.90.mg/ boiler 100mg/
m3; 4# circulating m3; 4# circulating
fluidised bed fluidised bed
boiler 4.25mg/m3 boiler 50mg/m3
2017 ANNUAL REPORT
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OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
3. Environmental protection matters (Cont’d)
Construction and operation of facilities for pollution prevention and control
(1) The Company and its subsidiaries strictly comply with laws, regulations and relevant rules regarding
environmental protection of the central and local government. The construction of projects strictly executed
the evaluation system on impacts of project construction on environment. In order to ensure pollutants are
discharged strictly in accordance to requirements under laws and regulation and disposed properly, production
and operation strictly comply with the national Law on the Prevention and Control of Environmental Pollution,
Law on the Prevention and Control of Air Pollution, Ten Rules Regarding Water Pollution and Law on the
Prevention and Control of Environmental Pollution by Solid Waste.
(2) Both the Company and its subsidiaries are equipped with comprehensive environmental protection treatment
facilities. The aerobic-anaerobic-in-depth treatment technology is the major technology for water treatment,
which can achieve standardised discharge of waste water. Moreover, subsidiaries are equipped with recycling
system for process effluent, and reuse treated waste water to the greatest extent in order to minimise pollution.
The Company has constructed a total of 8 water treatment plants, with daily treatment capacity of 350,000 m3.
A total of ten online water monitor facilities were installed in subsidiaries. Five online water monitor facilities are
directly managed by the environmental protection bureau, while the remaining five online water monitor facilities
are operated by entrusted enterprises qualified for running such facilities. In addition, governmental authority
will regularly visit the Company to conduct comparison of online monitor data every quarter. All data meets the
standards.
(3) All subsidiaries have their own power plants. Each self-owned plant has its own environmental protection
facilities for de-dusting, desulphurisation and denitrification. Denitrification is conducted through SNCR; while
desulphurisation is primarily conducted through gypsum desulphurisation (ammonia desulphurisation is adopted
in self-owned plant of Jiangxi Chenming).
Environmental impact assessment of construction projects and other environmental protection administrative
licensing
The Company strictly complied with environmental laws and regulations all along to carry out environmental impact
assessment of construction projects. The construction projects are all subject to environmental impact assessment.
During the construction process, a reasonable environmental protection project construction plan is formulated and
strictly implemented. The environmental protection facilities and the main project are designed, constructed and put
into operation at the same time. At present, all construction projects put into production have obtained environmental
impact assessment approval and acceptance approval.
In 2017, the Company applied to the Environmental Protection Bureau in accordance with the Measures for the
Administration of Pollutant Discharge Permits of the Ministry of Environmental Protection. All subsidiaries completed
the formalities for new discharge permits in June.
76 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XVIII. Fulfilment of Social Responsibility (Cont’d)
3. Environmental protection matters (Cont’d)
Emergency plan for emergency environmental incidents
The Company has strictly implemented emergency regulations for emergency environmental incidents, and
formulated the “Emergency plan for emergency environmental incidents” according to the technical requirements in
the “Technical Guidelines for Emergency Environmental Pollution Accidents”. The plan is reviewed by and filed with
the Environmental Protection Bureau, and regular emergency training and emergency drills are conducted. Emergency
measures in relation to dangerous chemicals are formulated in accordance with the environmental protection
requirements. At the same time, necessary emergency supplies are provided with regularly inspections and updates.
Environmental self-monitoring programme
The Company has strictly complied with self-monitoring laws and regulations and conducted self-monitoring in
accordance with environmental protection requirements to establish and perfect the corporate environmental
management ledgers and materials. At present, self-monitoring is a combination of manual monitoring and automatic
monitoring. At the same time, qualified units are engaged to conduct regular monitoring. Automatic monitoring
projects include: Total wastewater discharge (COD, Ammonia nitrogen, flow rate); power plant, Alkali recovered
furnace, and lime kiln exhaust emission (Sulphur dioxide, Nitrogen oxide, Smoke). Manually monitored items include:
Daily monitoring of COD, Ammonia nitrogen, SS, chroma, pH, total phosphorus, and total nitrogen indicators. Sewage
and other monitoring projects, unorganised exhaust emission, solid waste, and noise at the plant boundary, are
monitored on a monthly or quarterly basis by qualified units engaged in accordance with the local environmental
protection requirements in relation to each subsidiary.
The self-monitoring data and environmental monitoring programmes for pollutants discharge of various subsidiaries
are published on the national key pollution source information disclosure website and the provincial key pollution
source information disclosure website.
Other environmental information to be disclosed
The relevant environmental protection information of the pollutant discharge permit information and the pollutant
discharge permit requirements is announced on the national sewage discharge permit management information
platform.
Other environmental protection related information
Other environmental protection related information is announced on the Company’s website.
2017 ANNUAL REPORT 77
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OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XIX. Other matters of significance
√ Applicable Not applicable
1. Non-public issue of A shares
At the 8th extraordinary meeting of the eighth session of the Board, relevant resolutions, including the Resolutions
in Respect of the Extension of the Validity of the Resolutions in Respect of the Non-Public Issue of Shares of the
Company were considered and approved. In view of the fact that the application for non-public issue of shares of the
Company was still under review, it was proposed to extend the validity of the shareholders’ meeting resolutions in
respect of the non-public issue of shares for a period of 12 months (i.e. 2 June 2018) to ensure the smooth progress
of the non-public issue of shares and related matters. The Fourth Revision of Non-public Offering for 2016 was
disclosed on 8 June 2017, and the Announcement on Adjustments to the Issue Price and Size for the Non-Public
Issue of A Shares after Implementation of the 2016 Profit Distribution Plan was published on 26 July 2017.
As of the disclosure date of the Report, the Company has not received the related approval of the CSRC. The
Company will perform its obligations to disclose the related information on a timely basis based on the approval of the
CSRC.
2. Issue of medium-term notes with an amount of RMB3,000 million.
The public issue of the 2017 first tranche of medium-term notes in the national inter-bank bond market was launched
by the Company on 11 July 2017. The amount of the issue was RMB1,000 million with a nominal value of RMB100
each at the interest rate of 6.80%.
The public issue of the 2017 second tranche of medium-term notes in the national inter-bank bond market was
launched by the Company on 27 September 2017. The amount of the issue was RMB2,000 million with a nominal
value of RMB100 each at the interest rate of 6.30%.
3. Establishment of Shanghai Chenming Industry Co., Ltd.
In order to promote the diversified development of the Company, further expand its business scope, extend its
market influence, enhance its overall strength and comprehensive competitiveness, and develop new sources of profit
growth, the Company established a wholly-owned subsidiary in Shanghai named Shanghai Chenming Industry Co.,
Ltd. with self-owned funds of RMB1,000 million.
For details, please refer to the relevant announcement (announcement no.: 2017-113) of the Company published on
CNINFO on 26 September 2017.
4. Capital increase in Chenming Finance Company
In order to further improve the fund settlement, management and investment and financing standards, acquire more
interbank funds and improve the profitability of Chenming Finance Company, the Company and Jiangxi Chenming
Paper Co., Ltd. intended to increase the capital of Chenming Finance Company by RMB800 million and RMB200
million with their own funds respectively. After the completion of the capital increase, the registered capital of
Chenming Finance Company increased to RMB3,000 million from RMB2,000 million.
For details, please refer to the relevant announcement (announcement no.: 2017-120) of the Company published on
CNINFO on 14 October 2017.
78 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XIX. Other matters of significance (Cont’d)
5. Establishment of new financial leasing companies
In order to promote the diversified development of the financial segment of the Group, further expand the business
scope of the financial leasing business, enhance the overall strength and comprehensive competitiveness of the
Company and create new sources of profit growth for the Company, the Company proposed to establish Shanghai
Chenming Financial Leasing Co., Ltd. and Guangzhou Chenming Financial Leasing Co., Ltd in Shanghai and
Guangzhou respectively.
For details, please refer to the relevant announcements (announcement no.: 2017-114, 2017-143) of the Company
published on CNINFO on 26 September 2017 and 16 November 2017.
6. Disposal of 30% equity interest in Xuchang Chenming
In order to further integrate resources of the Company, optimise its asset structure and reduce its management risk,
the Resolution on the disposal of 30% equity interest in Xuchang Chenming was considered and approved at the
eighteenth extraordinary meeting of the eighth session of the Board of the Company, pursuant to which the Company
proposed to dispose of 30% equity interest in its controlling subsidiary Xuchang Chenming Paper Co., Ltd. through
public tender.
For details, please refer to the relevant announcement (announcement no.: 2017-148) of the Company published on
CNINFO on 28 November 2017.
7. Issue of super & short-term commercial paper approved for registration
In order to further expand the finance channels of the Company, lower the finance expenses, improve the debt
structure and enhance the benefits of the Company, the Resolution on the issue of super & short-term commercial
paper was considered and approved at the 2016 Annual General Meeting of the Company held on 21 April 2017. The
issue of super & short-term commercial paper of the Company was filed and approved by the National Association of
Financial Market Institutional Investors and received the acceptance of registration notice (Zhong Shi Xie Zhu [2017]
SCP242), by which the Company was approved to issue super & short-term commercial paper with registered amount
of RMB 15 billion. The registered amount is valid for 2 years from the date of receipt of the notice and can be issued
in phases within the valid registration period.
For details, please refer to the relevant announcement (announcement no.: 2017-085) of the Company published on
CNINFO on 5 August 2017.
2017 ANNUAL REPORT
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OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XIX. Other matters of significance (Cont’d)
8. Information disclosure index for 2017
Announcement No. Subject matter Date of publication Publication website and index
2017-001 Announcement on Estimated Annual Results for 2016 10 January 2017 http://www.cninfo.com.cn
2017-002 Announcement on Result of the Issue of 2017 First Tranche of 10 January 2017 http://www.cninfo.com.cn
Short-term Commercial Paper
2017-003 Announcement on Result of the Issue of 2017 First Tranche of 12 January 2017 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2017-004 Indicative Announcement on Subsidiary Receiving Subsidy 19 January 2017 http://www.cninfo.com.cn
2017-005 Supplementary Announcement Subsidiary Receiving Subsidy 20 January 2017 http://www.cninfo.com.cn
2017-006 Announcement in respect of Resolutions of the Fourth Meeting 18 February 2017 http://www.cninfo.com.cn
of the Eighth Session of the Board of Directors
2017-007 Notice of 2016 Annual General Meeting 18 February 2017 http://www.cninfo.com.cn
2017-008 2016 Annual Report Summary 18 February 2017 http://www.cninfo.com.cn
2017-009 Announcement in respect of Resolutions of the Fifth Meeting of the 18 February 2017 http://www.cninfo.com.cn
Eighth Session of the Supervisory Committee
2017-010 Announcement on Provision of Guarantee for General Credit Lines 18 February 2017 http://www.cninfo.com.cn
of Relevant Subsidiaries
2017-011 Announcement on External Investment (I) 18 February 2017 http://www.cninfo.com.cn
2017-012 Announcement on Provision of Financial Support to Haiming 18 February 2017 http://www.cninfo.com.cn
Mining and Related Party Transaction
2017-013 Announcement on External Investment (II) 18 February 2017 http://www.cninfo.com.cn
2017-014 Announcement on Expected Ordinary Connected Transactions 18 February 2017 http://www.cninfo.com.cn
in 2017
2017-015 Indicative Announcement 25 February 2017 http://www.cninfo.com.cn
2017-016 Announcement on Asset Disposal 1 March 2017 http://www.cninfo.com.cn
2017-017 Announcement in respect of Resolutions of the Seventh Extraordinary 7 March 2017 http://www.cninfo.com.cn
Meeting of the Eighth Session of the Board of Directors
2017-018 Notice of 2016 Annual General Meeting 7 March 2017 http://www.cninfo.com.cn
2017-019 Announcement in respect of Resolutions of the Fourth Extraordinary 7 March 2017 http://www.cninfo.com.cn
Meeting of the Eighth Session of the Supervisory Committee
2017-020 Announcement on the Cancellation of Proposal for the 2016 Annual 8 March 2017 http://www.cninfo.com.cn
General Meeting
2017-021 Supplemental Notice of 2016 Annual General Meeting 8 March 2017 http://www.cninfo.com.cn
2017-022 Announcement on the Distribution of Dividend for Preference Share 10 March 2017 http://www.cninfo.com.cn
2017-023 Announcement on Result of the Issue of 2017 Second Tranche 10 March 2017 http://www.cninfo.com.cn
of Super & Short-term Commercial Paper
2017-024 Full Report of Changes in Equity 15 March 2017 http://www.cninfo.com.cn
2017-025 Announcement on Result of the Issue of 2017 Third Tranche of 17 March 2017 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2017-026 Announcement on Entering into a Strategic Cooperation Agreement 21 March 2017 http://www.cninfo.com.cn
with the People’s Government of Weidu District, Xuchang City
2017-027 Announcement on Approval of Public Issuance of Corporate Bonds 24 March 2017 http://www.cninfo.com.cn
by the China Securities Regulatory Commission
80 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XIX. Other matters of significance (Cont’d)
8. Information disclosure index for 2017 (Cont’d)
Announcement No. Subject matter Date of publication Publication website and index
2017-028 Indicative Announcement on Subsidiary Receiving Subsidy 31 March 2017 http://www.cninfo.com.cn
2017-029 Second Supplementary Notice of the 2016 Annual General Meeting 6 April 2017 http://www.cninfo.com.cn
2017-030 Announcement on Estimated Results for the First Quarter of 2017 11 April 2017 http://www.cninfo.com.cn
2017-031 Announcement on Entering into a Strategic Cooperation Agreement 11 April 2017 http://www.cninfo.com.cn
with Qilu Bank
2017-032 Announcement in respect of Resolutions of the Eighth Extraordinary 13 April 2017 http://www.cninfo.com.cn
Meeting of the Eighth Session of the Board of Directors
2017-033 Announcement in respect of Resolutions of the Fifth Extraordinary 13 April 2017 http://www.cninfo.com.cn
Meeting of the Eighth Session of the Supervisory Committee
2017-034 Announcement in Relation to the Extension of the Validity 13 April 2017 http://www.cninfo.com.cn
of the Resolutions in Respect of the Non-Public Issue of Shares
of the Company and the Authorisation Granted to the Board to Deal
with the Relevant Matters
2017-035 Notice of 2017 First Extraordinary General Meeting 13 April 2017 http://www.cninfo.com.cn
2017-036 Notice of the 2017 First Domestic Listed Share Class Meeting and 2017 13 April 2017 http://www.cninfo.com.cn
First Overseas Listed Share Class Meeting
2017-037 Announcement on Result of the Issue of 2017 Second Tranche of 18 April 2017 http://www.cninfo.com.cn
Short-term Commercial Paper
2017-038 Indicative Announcement on 2016 Annual General Meeting 19 April 2017 http://www.cninfo.com.cn
2017-039 Announcement in respect of Resolutions of the Ninth Extraordinary 19 April 2017 http://www.cninfo.com.cn
Meeting of the Eighth Session of the Board of Directors
2017-040 Announcement in respect of Resolutions of the Sixth Extraordinary 19 April 2017 http://www.cninfo.com.cn
Meeting of the Eighth Session of the Supervisory Committee
2017-041 Announcement on Third Revision of Non-public Offering for 2016 19 April 2017 http://www.cninfo.com.cn
2017-042 Announcement on Dilution of Current Returns and Remedial Measures 19 April 2017 http://www.cninfo.com.cn
upon Non-public Offering (Third Revision)
2017-043 Announcement on Resolutions of the 2016 Annual General Meeting 22 April 2017 http://www.cninfo.com.cn
2017-044 Announcement on Result of the Issue of 2017 Fourth Tranche of 26 April 2017 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2017-045 Announcement in respect of Resolutions of the Fifth Meeting of the 28 April 2017 http://www.cninfo.com.cn
Eighth Session of the Board of Directors
2017-046 Announcement on Provision of Financial Support to Investee 28 April 2017 http://www.cninfo.com.cn
2017-047 Announcement in respect of Resolutions of the Sixth Meeting of the 28 April 2017 http://www.cninfo.com.cn
Eighth Session of the Supervisory Committee
2017-048 2017 First Quarterly Report 28 April 2017 http://www.cninfo.com.cn
2017-049 Indicative Announcement on Receipt of Subsidy 28 April 2017 http://www.cninfo.com.cn
2017-050 Announcement on the Total New Borrowings for the Year Exceeding 20% 9 May 2017 http://www.cninfo.com.cn
of the Net Assets as at the End of the Previous Year
2017-051 Announcement on Additional Resolutions Proposed at the 2017 16 May 2017 http://www.cninfo.com.cn
First Extraordinary General Meeting
2017-052 Supplementary Notice of 2017 First Extraordinary General Meeting 16 May 2017 http://www.cninfo.com.cn
2017 ANNUAL REPORT 81
3704827-t01fnar (Shandong Chenming) p.81 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XIX. Other matters of significance (Cont’d)
8. Information disclosure index for 2017 (Cont’d)
Announcement No. Subject matter Date of publication Publication website and index
2017-053 Second Supplementary Notice of the 2017 First Domestic Listed Share 16 May 2017 http://www.cninfo.com.cn
Class Meeting and 2017 First Overseas Listed Share Class Meeting
2017-054 Announcement on Pledge of Shares by Shareholders 1 June 2017 http://www.cninfo.com.cn
2017-055 Announcement on Resolution of the 2017 First Extraordinary 3 June 2017 http://www.cninfo.com.cn
General Meeting
2017-056 Poll Results Announcement of the 2017 First Domestic A Shareholders’ 3 June 2017 http://www.cninfo.com.cn
and B Shareholders’ Class Meeting and the 2017 First Overseas
H Shareholders’ Class Meeting
2017-057 Announcement on Release of Stock Pledge by Shareholders 3 June 2017 http://www.cninfo.com.cn
2017-058 Announcement on Pledge of Shares by Shareholders 8 June 2017 http://www.cninfo.com.cn
2017-059 Announcement in respect of Resolutions of the Tenth Extraordinary 8 June 2017 http://www.cninfo.com.cn
Meeting of the Eighth Session of the Board of Directors
2017-060 Announcement in respect of Resolutions of the Seventh Extraordinary 8 June 2017 http://www.cninfo.com.cn
Meeting of the Eighth Session of the Supervisory Committee
2017-061 Announcement on Entering into Conditional Share Purchase Agreement 8 June 2017 http://www.cninfo.com.cn
and Connected Transactions under the Non-public Offering of A Share
(Second Revision)
2017-062 Announcement on Dilution of Current Returns and Remedial Measures 8 June 2017 http://www.cninfo.com.cn
upon Non-public Offering (Fourth Revision)
2017-063 Announcement on Adjustment to the Price Determination Date 8 June 2017 http://www.cninfo.com.cn
for the Non-public Issue of A Shares
2017-064 Notice of 2017 Second Extraordinary General Meeting 8 June 2017 http://www.cninfo.com.cn
2017-065 Notice of the 2017 Second Domestic Listed Share Class Meeting and 8 June 2017 http://www.cninfo.com.cn
2017 Second Overseas Listed Share Class Meeting
2017-066 Announcement on the Implementation of Dividend Distribution to Holders 9 June 2017 http://www.cninfo.com.cn
of A Shares and B Shares for 2016
2017-067 Indicative Announcement 17 June 2017 http://www.cninfo.com.cn
2017-068 Announcement on Resumption of Trading 17 June 2017 http://www.cninfo.com.cn
2017-069 Indicative Announcement 23 June 2017 http://www.cninfo.com.cn
2017-070 Indicative Announcement 30 June 2017 http://www.cninfo.com.cn
2017-071 Indicative Announcement 3 July 2017 http://www.cninfo.com.cn
2017-072 Indicative Announcement of 2017 Second Extraordinary General Meeting, 8 July 2017 http://www.cninfo.com.cn
2017 Second Class Meeting For Domestic Shareholders and 2017
Second Class Meeting For Overseas Shareholders
2017-073 Announcement on the Accumulated New Borrowing of the Current Year 8 July 2017 http://www.cninfo.com.cn
2017-074 Announcement on Estimated Interim Results for 2017 10 July 2017 http://www.cninfo.com.cn
2017-075 Announcement on Result of the Issue of 2017 First Tranche of 15 July 2017 http://www.cninfo.com.cn
Medium-term Notes
2017-076 Indicative Announcement 17 July 2017 http://www.cninfo.com.cn
2017-077 Announcement in Respect of Resolutions of The Eleventh Extraordinary 25 July 2017 http://www.cninfo.com.cn
Meeting of the Eighth Session of the Board of Directors
2017-078 Announcement on the Commencement of Financial Leasing Business 25 July 2017 http://www.cninfo.com.cn
2017-079 Announcement on the Provision of Guarantee to Wholly-Owned 25 July 2017 http://www.cninfo.com.cn
Subsidiary and Investee
82 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3704827-t01fnar (Shandong Chenming) p.82 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XIX. Other matters of significance (Cont’d)
8. Information disclosure index for 2017 (Cont’d)
Announcement No. Subject matter Date of publication Publication website and index
2017-080 Notice of 2017 Third Extraordinary General Meeting 25 July 2017 http://www.cninfo.com.cn
2017-081 Announcement in Respect of Resolutions of 2017 Second Extraordinary 25 July 2017 http://www.cninfo.com.cn
General Meeting, 2017 Second Class Meeting For Domestic
Shareholders and 2017 Second Class Meeting For
Overseas Shareholders
2017-082 Announcement on Adjustments to the Issue Price and Size for the 26 July 2017 http://www.cninfo.com.cn
Non-Public Issue of A Shares after Implementation of the 2016
Profit Distribution Plan
2017-083 Announcement on Release of Stock Pledge by Shareholders 26 July 2017 http://www.cninfo.com.cn
2017-084 Indicative Announcement 31 July 2017 http://www.cninfo.com.cn
2017-085 Announcement on Issue of Super & Short-term Commercial 5 August 2017 http://www.cninfo.com.cn
Paper Approved for Registration
2017-086 Announcement in respect of Resolutions of the Twelfth Extraordinary 9 August 2017 http://www.cninfo.com.cn
Meeting of the Eighth Session of the Board of Directors
2017-087 Announcement on the Distribution of Dividend for Second Tranche 9 August 2017 http://www.cninfo.com.cn
of Preference Share
2017-088 Announcement on Pledge of Shares by Shareholders 9 August 2017 http://www.cninfo.com.cn
2017-089 Announcement on Result of the Issue of 2017 Fifth Tranche of 12 August 2017 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2017-090 Announcement on 2017 Public Issue of Corporate Bonds to 15 August 2017 http://www.cninfo.com.cn
Qualified Investors (First Tranche)
2017-091 Announcement in respect of Resolutions of the Sixth Meeting of the 16 August 2017 http://www.cninfo.com.cn
Eighth Session of the Board of Directors
2017-092 2017 Interim Report Summary 16 August 2017 http://www.cninfo.com.cn
2017-093 Announcement on External Investment 16 August 2017 http://www.cninfo.com.cn
2017-094 Announcement on the Provision of Guarantee to Wholly-Owned Subsidiary 16 August 2017 http://www.cninfo.com.cn
2017-095 Announcement on Release of Stock Pledge by Shareholders 16 August 2017 http://www.cninfo.com.cn
2017-096 Announcement on the Implementation of the Distribution of Residual 16 August 2017 http://www.cninfo.com.cn
Profits of 2016 to Preference Shareholders
2017-097 Announcement on the Coupon Rate of 2017 Public Issue of Corporate 17 August 2017 http://www.cninfo.com.cn
Bonds to Qualified Investors (First Tranche)
2017-098 Announcement on the Participation in 2017 Online Collective Reception 19 August 2017 http://www.cninfo.com.cn
Activity for Investors of Listed Companies in Shandong Jurisdiction
2017-099 Announcement on the Result of 2017 Public Issue of Corporate Bonds 22 August 2017 http://www.cninfo.com.cn
to Qualified Investors (First Tranche)
2017-100 Supplementary Announcement of 2017 Third Extraordinary 25 August 2017 http://www.cninfo.com.cn
General Meeting
2017-101 Supplementary Notice of 2017 Third Extraordinary General Meeting 25 August 2017 http://www.cninfo.com.cn
2017-102 Indicative Announcement 25 August 2017 http://www.cninfo.com.cn
2017-103 Indicative Announcement 29 August 2017 http://www.cninfo.com.cn
2017-104 Announcement on Result of the Issue of 2017 Sixth Tranche of 9 September 2017 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2017 ANNUAL REPORT 83
3704827-t01fnar (Shandong Chenming) p.83 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XIX. Other matters of significance (Cont’d)
8. Information disclosure index for 2017 (Cont’d)
Announcement No. Subject matter Date of publication Publication website and index
2017-105 Announcement on Release of Stock Pledge by Shareholders 9 September 2017 http://www.cninfo.com.cn
2017-106 Indicative Announcement 12 September 2017 http://www.cninfo.com.cn
2017-107 Announcement on the Distribution of Dividend for Third Tranche 13 September 2017 http://www.cninfo.com.cn
of Preference Share
2017-108 Poll Results Announcement of the 2017 Third Extraordinary 13 September 2017 http://www.cninfo.com.cn
General Meeting
2017-109 Announcement on Completion of Transfer of Shares Granted to Chairman 15 September 2017 http://www.cninfo.com.cn
2017-110 Announcement On Result Of The Issue Of 2017 Seventh Tranche Of 22 September 2017 http://www.cninfo.com.cn
Super & Short-Term Commercial Paper
2017-111 Corrigendum to 2017 Interim Report 22 September 2017 http://www.cninfo.com.cn
2017-112 Announcement in respect of Resolutions of the Thirteenth Extraordinary 26 September 2017 http://www.cninfo.com.cn
Meeting of the Eighth Session of the Board of Directors
2017-113 Announcement on External Investment 26 September 2017 http://www.cninfo.com.cn
2017-114 Announcement on External Investment 26 September 2017 http://www.cninfo.com.cn
2017-115 Announcement on the Listing of 2017 Public Issue of Corporate Bonds 27 September 2017 http://www.cninfo.com.cn
to Qualified Investors (First Tranche)
2017-116 Announcement on Result of the Issue of 2017 Second Tranche of 30 September 2017 http://www.cninfo.com.cn
Medium-term Notes
2017-117 Announcement on Pledge of Shares by Shareholders 30 September 2017 http://www.cninfo.com.cn
2017-118 Announcement on Estimated Results for the First Three Quarters of 2017 11 October 2017 http://www.cninfo.com.cn
2017-119 Announcement in respect of Resolutions of the Fourteenth Extraordinary 14 October 2017 http://www.cninfo.com.cn
Meeting of the Eighth Session of the Board of Directors
2017-120 Announcement on External Investment 14 October 2017 http://www.cninfo.com.cn
2017-121 Announcement on External Investment 14 October 2017 http://www.cninfo.com.cn
2017-122 Announcement on Provision of Secured Borrowings to Xuchang Chenming 14 October 2017 http://www.cninfo.com.cn
2017-123 Notice of 2017 Fourth Extraordinary General Meeting 14 October 2017 http://www.cninfo.com.cn
2017-124 Announcement on Result of the Issue of 2017 Eighth Tranche of 14 October 2017 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2017-125 Announcement in respect of Resolutions of the Fifteenth Extraordinary 20 October 2017 http://www.cninfo.com.cn
Meeting of the Eighth Session of the Board of Directors
2017-126 Announcement on External Investment 20 October 2017 http://www.cninfo.com.cn
2017-127 Announcement on Pledge of Shares by Shareholders 20 October 2017 http://www.cninfo.com.cn
2017-128 Indicative Announcement 20 October 2017 http://www.cninfo.com.cn
2017-129 Announcement on Result of the Issue of 2017 Ninth Tranche of 24 October 2017 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2017-130 2017 Third Quarterly Report 26 October 2017 http://www.cninfo.com.cn
2017-131 Announcement on Result of the Issue of 2017 Tenth Tranche of 28 October 2017 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2017-132 Announcement on Resignation of Supervisor 30 October 2017 http://www.cninfo.com.cn
2017-133 Announcement in respect of Resolutions of the Sixteenth Extraordinary 31 October 2017 http://www.cninfo.com.cn
Meeting of the Eighth Session of the Board of Directors
2017-134 Announcement on the Transfer of 45% Equity Interest in Hongtai 31 October 2017 http://www.cninfo.com.cn
Real Estate to the Company
84 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3704827-t01fnar (Shandong Chenming) p.84 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XIX. Other matters of significance (Cont’d)
8. Information disclosure index for 2017 (Cont’d)
Announcement No. Subject matter Date of publication Publication website and index
2017-135 Announcement on the Provision of Guarantee to the Syndicated Loan 31 October 2017 http://www.cninfo.com.cn
of Zhanjiang Chenming
2017-136 Announcement on Pledge of Shares by Shareholders 31 October 2017 http://www.cninfo.com.cn
2017-137 Announcement on Release of Stock Pledge by Shareholders 3 November 2017 http://www.cninfo.com.cn
2017-138 Announcement on Increase in Shareholding by Senior Management 10 November 2017 http://www.cninfo.com.cn
2017-139 Announcement on Resignation of General Manager 10 November 2017 http://www.cninfo.com.cn
2017-140 Announcement on Additional Resolutions Proposed at the 2017 11 November 2017 http://www.cninfo.com.cn
Fourth Extraordinary General Meeting
2017-141 Supplemental Notice of 2017 Fourth Extraordinary General Meeting 11 November 2017 http://www.cninfo.com.cn
2017-142 Announcement in respect of Resolutions of the Seventeenth Extraordinary 16 November 2017 http://www.cninfo.com.cn
Meeting of the Eighth Session of the Board of Directors
2017-143 Announcement on External Investment 16 November 2017 http://www.cninfo.com.cn
2017-144 Announcement on External Investment 16 November 2017 http://www.cninfo.com.cn
2017-145 Announcement on Result of the Issue of 2017 Eleventh Tranche of 18 November 2017 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2017-146 Announcement on Receipt of Government Subsidy 25 November 2017 http://www.cninfo.com.cn
2017-147 Announcement in respect of Resolutions of the Eighteenth Extraordinary 28 November 2017 http://www.cninfo.com.cn
Meeting of the Eighth Session of the Board of Directors
2017-148 Announcement on the Disposal of 30% Equity Interest in 28 November 2017 http://www.cninfo.com.cn
Xuchang Chenming
2017-149 Poll Results Announcement of the 2017 Fourth Extraordinary 1 December 2017 http://www.cninfo.com.cn
General Meeting
2017-150 Announcement on Release of Stock Pledge by Shareholders 13 December 2017 http://www.cninfo.com.cn
2017-151 Announcement on Pledge of Shares by Shareholders 16 December 2017 http://www.cninfo.com.cn
2017-152 Announcement on the Results of Redemption and Delisting of 20 December 2017 http://www.cninfo.com.cn
“12 Chenming Bond”
2017-153 Announcement on Result of the Issue of 2017 Twelfth Tranche of 21 December 2017 http://www.cninfo.com.cn
Super & Short-term Commercial Paper
2017-154 Announcement on Pledge of Shares by Shareholders 23 December 2017 http://www.cninfo.com.cn
2017-155 Announcement on Progress of Receipt of Government Subsidy 28 December 2017 http://www.cninfo.com.cn
2017-156 Announcement in respect of Resolutions of the Nineteenth Extraordinary 30 December 2017 http://www.cninfo.com.cn
Meeting of the Eighth Session of the Board of Directors
2017-157 Announcement on the Provision of Guarantee for the Issue of USD Bonds 30 December 2017 http://www.cninfo.com.cn
2017-158 Announcement on External Investment(I) 30 December 2017 http://www.cninfo.com.cn
2017-159 Announcement on External Investment (II) 30 December 2017 http://www.cninfo.com.cn
2017-160 Announcement on the Commencement of Financial Leasing Business 30 December 2017 http://www.cninfo.com.cn
2017-161 Announcement in respect of Changes in Accounting Policy and 30 December 2017 http://www.cninfo.com.cn
Accounting Estimation
2017-162 Notice of 2018 First Extraordinary General Meeting 30 December 2017 http://www.cninfo.com.cn
2017-163 Announcement on Release of Stock Pledge by Shareholders 30 December 2017 http://www.cninfo.com.cn
2017-164 Announcement on Receipt of Government Subsidy 30 December 2017 http://www.cninfo.com.cn
2017-165 Announcement on Resolution of the Eighth Extraordinary Meeting of the 30 December 2017 http://www.cninfo.com.cn
Eighth Session of the Supervisory Committee
2017 ANNUAL REPORT 85
3704827-t01fnar (Shandong Chenming) p.85 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:33
VII Material Matters
XX. Matters of significant of subsidiaries of the Company
√ Applicable Not applicable
1. Construction of 510,000-tonne high-end cultural paper project of Shouguang Meilun
In order to make full use of the existing pulping capacity and cost advantages of Zhanjiang Chenming Pulp & Paper
Co., Ltd. and optimise the Company’s market layout, it was proposed to construct a new production line with an
annual output of 510,000-tonne high-end cultural paper in the original product line with a capacity of 600,000-tonne
coating linerboard.
For details, please refer to the relevant announcement (announcement no.: 2017-013) of the Company published on
CNINFO on 18 February 2017.
2. Transfer of 45% equity interest in Hongtai Real Estate to Shanghai Chenming Industry
Shanghai Chenming Industry Co., Ltd. and Shanghai Hongkelong Investment Co., Ltd. entered into the Equity
Acquisition Agreement. Based on the appraised value of the total shareholders’ equity of Shanghai Hongtai Real
Estate Co., Ltd. of RMB 3,908,397 thousand, Shanghai Chenming proposed to acquire 45% equity interest in and
the loan due from Hongtai Real Estate held by Hongkelong at a consideration of RMB1,714,356,217.76, in which the
equity interest amounted to RMB 1,590,646,717.76 and loan amounted to RMB123,709,500.
For details, please refer to the relevant announcement (announcement no.: 2017-134) of the Company published on
CNINFO on 31 October 2017.
3. Construction of Differential Viscose Fibre and Ancillary Production Facilities Project of Huanggang
Chenming
In order to expand the industrial chain of the Company, facilitate the project construction of Huanggang Chenming,
optimise the industrial deployment, cultivate new sources of profit growth and further enhance the competitiveness
of the Company, Huanggang Chenming intended to establish a new production line with annual production capacity
of 500,000 tonnes of differential viscose fibre and ancillary production facilities with annual production capacity of
320,000 tonnes of caustic soda, 170,000 tonnes of hydrogen peroxide, 150,000 tonnes of chloroacetic acid, 240,000
tonnes of epichlorohydrin, 260,000 tonnes of refined glycerine, 50,000 tonnes of carbon disulfide, 420,000 tonnes of
sulfuric acid and 232,000 tonnes of calcium chloride, as well as the site construction of ancillary production facilities,
and living quarters in Huanggang City, Hubei Province.
For details, please refer to the relevant announcement (announcement no.: 2017-158) of the Company published on
CNINFO on 30 December 2017.
4. Construction of Cogeneration Project in the Chemical Industrial Park of Huanggang Chenming
In order to facilitate the project construction of Huanggang Chenming, satisfy the steam load of Huanggang
Chenming’s viscose and ancillary chemicals project and provide stable steam supply to enterprises and public service
units in the chemical industrial park with the construction of supporting facilities of high standards and high-quality
landscape and environment, Huanggang Chenming intended to construct two 125MW high-temperature and high-
pressure extraction back pressure steam generators and four 580t/h circulating fluidised bed boilers in Huanggang
City, Hubei Province, as the source of heat supply for the industrial park with related supporting facilities.
For details, please refer to the relevant announcement (announcement no.: 2017-159) of the Company published on
CNINFO on 30 December 2017.
86 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3704827-t01fnar (Shandong Chenming) p.86 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:33
VIII Changes in Share Capital and Shareholders
I. Changes in shares
1. Changes in shares
Unit: share
Opening balance Change during the reporting period (+/-) Closing balance
Shares
converted
Amount Percentage New issue Bonus issue from reserves Others Subtotal Amount Percentage
I. Restricted shares 7,787,180 0.40% 0 0 0 147,921 147,921 7,935,101 0.41%
1. Shares held by other
domestic investors 7,787,180 0.40% 0 0 0 147,921 147,921 7,935,101 0.41%
Including: shares held
by domestic
natural persons 7,787,180 0.40% 0 0 0 147,921 147,921 7,935,101 0.41%
II. Non-restricted shares 1,928,618,287 99.58% 0 0 0 -147,921 -147,921 1,928,470,366 99.59%
1. RMB ordinary shares 1,105,591,276 57.07% 0 0 0 -201,721 -201,721 1,105,389,555 57.08%
2. Domestic listed
foreign shares 470,823,511 24.32% 0 0 0 53,800 53,800 470,877,311 24.32%
3. Overseas listed
foreign shares 352,203,500 18.19% 0 0 0 0 0 352,203,500 18.19%
III. Total number of shares 1,936,405,467 100.00% 0 0 0 0 0 1,936,405,467 100.00%
The reasons for such changes
√ Applicable Not applicable
Before the change, the number of restricted shares held by domestic natural persons decreased by 147,921 shares
from 7,787,180 shares to 7,935,101 shares due to the fact that:
According to the Practice Guidance for the Company’s Shares Held by the Directors, Supervisors and Senior
Management of the Listed Companies of Shenzhen Stock Exchange, 196,327 RMB ordinary shares (A shares) without
restriction granted to the Senior Management were put under restriction; 45,000 RMB ordinary shares (A shares)
without restriction additionally acquired by the Senior Management and supervisors were put under restriction;
and 46,200 domestic-listed foreign RMB shares (B shares) without restriction additionally acquired by the Senior
Management were put under restriction during the reporting period;
39,606 restricted RMB ordinary shares (A shares) held by the Senior Management who had resigned for more than
half a year were released; 100,000 domestic-listed foreign RMB shares (B shares) held by the Senior Management
who had resigned for more than half a year without restriction were released.
Approval of changes in shareholding
Applicable √ Not applicable
2017 ANNUAL REPORT
3704827-t01fnar (Shandong Chenming) p.87 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:40
VIII Changes in Share Capital and Shareholders
I. Changes in shares (Cont’d)
1. Changes in shares (Cont’d)
Transfer of shares arising from changes in shareholding
√ Applicable Not applicable
The Company issued the Announcement on Completion of Transfer of Shares Granted to Chairman (announcement
no.: 2017-109) on 15 September 2017 in relation to the transfer of the 261,769 tradable A shares without restriction
held by the former chairman of the Company, Mr. Chen Yongxing before his death to the current chairman, Mr. Chen
Hongguo. The transfer was filed to China Securities Depository and Clearing Company Limited, Shenzhen Branch and
the date of transfer was 11 September 2017.
As at the disclosure date of this report, Mr. Chen Hongguo held 6,696,296 A shares of the Company, representing
0.3458% of the total share capital of the Company.
The effects of changes in shareholding on financial indicators such as basic earnings per share, diluted earnings per
share and net assets per share attributable to shareholders of ordinary shares of the Company for the latest year and
the latest period
Applicable √ Not applicable
Other information considered necessary by the Company or required by the securities regulatory authorities to be
disclosed
Applicable √ Not applicable
2. Changes in restricted shares
Applicable √ Not applicable
88 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3704827-t01fnar (Shandong Chenming) p.88 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:40
VIII Changes in Share Capital and Shareholders
II. Issuance and listing of securities
1. Issuance of securities (excluding preference shares) during the reporting period
Applicable √ Not applicable
2. Changes in the total number of shares and structure of shareholders and the structure of the assets
and liabilities of the Company
Applicable √ Not applicable
3. Existing staff shares
Applicable √ Not applicable
III. Shareholders and beneficial controllers
1. Total number of shareholders and shareholdings
Unit: share
Total number of 94,435, of which 74,291 Total number of 97,370, of which 78,263 Total number of 0 Total number of
shareholders of ordinary were holders of A shares, shareholders of ordinary were holders of A shares, shareholders of shareholders of
shares as at the end 19,731 were holders of shares as at the end of 18,735 were holders of preference shares with preference shares with
of the reporting period B shares and 413 were the month prior to the B shares and 372 were restored voting right restored voting right as
holders of H shares publication date of this holders of H shares as at the end of the at the end of the month
annual report reporting period prior to the disclosure
date of the annual report
2017 ANNUAL REPORT
3704827-t01fnar (Shandong Chenming) p.89 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:40
VIII Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
1. Total number of shareholders and shareholdings (Cont’d)
Shareholdings of shareholders interested in more than 5% of the shares of the Company or Top 10 shareholders
Changes
(increase or
Number of decrease)
shares held at during the Number of Number of
Percentage of the end of the reporting restricted non-restrict
Name of shareholders Nature of shareholders shareholding reporting period period shares held shares held Share pledged or locked-up
Status of shares Number
SHOUGUANG CHENMING HOLDINGS State-owned legal person 15.13% 293,003,657 0 0 293,003,657 Pledged 171,599,100
COMPANY LIMITED
HKSCC NOMINEES LIMITED Overseas legal person 12.85% 248,867,250 2,288,100 0 248,867,250
CHENMING HOLDINGS (HONG KONG) LIMITED Overseas legal person 12.54% 242,754,375 69,660,975 0 242,754,375
CENTRAL HUIJIN ASSET MANAGEMENT LTD. Sate-owned legal person 2.07% 40,137,900 0 0 40,137,900
NATIONAL SOCIAL SECURITY FUND 403 Others 0.61% 11,853,596 7,111,563 0 11,853,596
VANGUARD EMERGING MARKETS Overseas legal person 0.44% 8,608,238 0 0 8,608,238
STOCK INDEX FUND
JIAO Yanxi Domestic nature person 0.37% 7,111,563 7,111,563 0 7,111,563
CHEN Hongguo Domestic nature person 0.35% 6,696,296 261,769 5,022,222 1,674,074
LSV EMERGING MARKETS EQUITY FUND, L.P. Overseas legal person 0.32% 6,102,800 0 0 6,102,800
VANGUARD TOTAL INTERNATIONAL Overseas legal person 0.31% 6,088,072 509,267 0 6,088,072
STOCK INDEX FUND
Connected relationship or connected party A shareholder, Chenming Holdings (Hong Kong) Limited, which is an overseas legal person, is a wholly-owned subsidiary of a shareholder, Shouguang Chenming
relationship among the above shareholders Holdings Company Limited, which is a state-owned legal person. Hence, they are persons acting in concert under Administration of Disclosure of Information on the
Change of Shareholdings in Listed Companies Procedures. Shareholder Chen Hongguo is the legal representative, chairman and general manager of Shouguang
Chenming Holdings Company Limited. Save for the above, it is not aware that any other shareholders of tradable shares are persons acting in concert and is also not
aware that any other shareholders of tradable shares are connected with each other.
90 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3704827-t01fnar (Shandong Chenming) p.90 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:40
VIII Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
1. Total number of shareholders and shareholdings (Cont’d)
Shareholdings of the top ten shareholders of non-restricted shares
Number of
non-restricted
shares held as
at the end of the
Name of shareholders reporting period Class of shares
Class of shares Number
SHOUGUANG CHENMING HOLDINGS 293,003,657 RMB ordinary shares 293,003,657
COMPANY LIMITED
HKSCC NOMINEES LIMITED Overseas listed
248,867,250 248,867,250
foreign shares
CHENMING HOLDINGS (HONG KONG) LIMITED 242,754,375 Domestic listed 140,478,375
foreign shares
Overseas listed 102,276,000
foreign shares
CENTRAL HUIJIN ASSET MANAGEMENT LTD. 40,137,900 RMB ordinary shares 40,137,900
NATIONAL SOCIAL SECURITY FUND 403 11,853,596 RMB ordinary shares 11,853,596
VANGUARD EMERGING MARKETS 8,608,238 Domestic listed 8,608,238
STOCK INDEX FUND foreign shares
JIAO Yanxi 7,111,563 RMB ordinary shares 7,111,563
LSV EMERGING MARKETS EQUITY FUND, L.P. 6,102,800 Domestic listed 6,102,800
foreign shares
VANGUARD TOTAL INTERNATIONAL 6,088,072 Domestic listed 6,088,072
STOCK INDEX FUND foreign shares
JIN Xing 5,789,200 Domestic listed 5,789,200
foreign shares
Connected relationship or connected A shareholder, Chenming Holdings (Hong Kong) Limited, which
party relationship among the top ten is an overseas legal person, is a wholly-owned subsidiary
shareholders of non-restricted shares, of a shareholder, Shouguang Chenming Holdings Company
and between the top ten shareholders of Limited, which is a state-owned legal person. Hence, they are
non-restricted shares and the persons acting in concert under Administration of Disclosure of
top ten shareholders Information on the Change of Shareholdings in Listed Companies
Procedures. Save for the above, it is not aware that any other
shareholders of tradable shares are persons acting in concert and
is also not aware that any other shareholders of tradable shares
are connected with each other.
Whether an agreed repurchase transaction was entered into during the reporting period by the top 10 ordinary
shareholders and top 10 shareholders of non-restricted shares of the Company
Yes √ No
The top 10 ordinary shareholders and top 10 shareholders of non-restricted ordinary shares of the Company did not
enter into any agreed repurchase transaction during the reporting period.
2017 ANNUAL REPORT 91
3704827-t01fnar (Shandong Chenming) p.91 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:40
VIII Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
2. Controlling shareholders of the Company
Nature of controlling shareholder: regional state-owned enterprise
Type of controlling shareholder: legal person
Legal
representative/
Name of controlling Person in charge Date of
shareholders of the unit establishment Enterprise code Principal business
Shouguang Chenming Chen Hongguo 30 December 78348518-9 Investment in paper
Holdings Company Limited 2005 making, electricity,
heat and arboriculture
by its own capital.
Shareholdings of controlling Save for the Company, Shouguang Chenming Holdings Company Limited does not
shareholders who have have control over or hold any equity interest of other domestic or overseas listed
control or hold shares in companies.
other domestic or overseas
listed companies during
the reporting period
Change of controlling shareholders during the reporting period
Applicable √ Not applicable
There was no change of controlling shareholders of the Company during the reporting period.
3. Beneficial owner of the Company
Nature of the beneficial owner: Regional state-owned assets administration authority
Type of the beneficial owner: legal person
Legal
representative/
Person in
charge of Date of
Name of beneficial owner the unit establishment Enterprise code Principal business
State-owned Assets Fu Xingang 1 August 1991 F5108355-4 Responsible for the
Supervision and management and
Administration Office of capital operation of the
Shouguang City state-owned assets of
enterprises and business
units in Shouguang city
Shareholdings of beneficial owner who has Save for the Company, State-owned Assets Supervision and
control or holds shares in other domestic Administration Office of Shouguang City does not have control
or overseas listed companies during over or hold any equity interest of other domestic or overseas
the reporting period listed companies.
Change of beneficial owner during the reporting period
Applicable √ Not applicable
There was no change of beneficial owner of the Company during the reporting period.
92 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3704827-t01fnar (Shandong Chenming) p.92 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:40
VIII Changes in Share Capital and Shareholders
III. Shareholders and beneficial controllers (Cont’d)
3. Beneficial owner of the Company (Cont’d)
Chart illustrating the relationship between the Company and the beneficial owner
Beneficial owner controlling the Company through trust or other asset management method
Applicable √ Not applicable
4. Other legal person shareholders interested in over 10% of the shares of the Company
Applicable √ Not applicable
5. Restrictions on decrease in shareholding by controlling shareholders, beneficial owner, reorganising
party and other undertaking parties
Applicable √ Not applicable
2017 ANNUAL REPORT 93
3704827-t01fnar (Shandong Chenming) p.93 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:40
IX Preference Shares
√ Applicable Not applicable
I. Issue and listing of preference shares during the past three years at the end of the reporting
period
√ Applicable Not applicable
Issue price With listing
(RMB/ Coupon Issue size permission Information of Information of
Method Issue date share) rate (share) Listing date (share) Delisting date use of proceeds changes to proceeds
Private 16 March 2016 100 4.36% 22,500,000 8 April 2016 22,500,000 NA http://www.cninfo.com.cn Not applicable
Private 16 August 2016 100 5.17% 10,000,000 12 September 2016 10,000,000 NA http://www.cninfo.com.cn Not applicable
Private 21 September 2016 100 5.17% 12,500,000 24 October 2016 12,500,000 NA http://www.cninfo.com.cn Not applicable
II. Holders of preference shares and their shareholdings
Unit: share
Total number of shareholders of 7 Total number of shareholders of
preference shares as at the end of preference shares as at the end of
the reporting period the month prior to the publication
date of this annual report
Holders holdings more than 5% of the preference shares of the Company or top ten holders of preference shares
Changes
(increase or
Number of decrease)
shares held at during the Number of Number of
Percentage of the end of the reporting restricted non-restrict
Name of shareholders Nature of shareholders shareholding reporting period period shares held shares held Share pledged or locked-up
Status of shares Number
BEIJING YIBEN ZHONGXING Domestic non-state- 27.78% 12,500,000 0 0 12,500,000 Pledged 12,500,000
INVESTMENT MANAGEMENT CO., LTD. owned legal person
BANK OF COMMUNICATIONS Others 22.44% 10,100,000 0 0 10,100,000
INTERNATIONAL TRUST CO., LTD. –
HUILI NO.167 SINGLE CAPITAL TRUST
BANK OF COMMUNICATIONS Others 14.22% 6,400,000 0 0 6,400,000
INTERNATIONAL TRUST CO., LTD. – HUILI
NO.136 SINGLE CAPITAL TRUST
QILU BANK CO., LTD. - QILU BANK QUANXIN Others 13.33% 6,000,000 0 0 6,000,000
WEALTH MANAGEMENT PRODUCT SERIES
HENGFENG BANK CO., LTD. Domestic non-state- 11.11% 5,000,000 0 0 5,000,000
owned legal person
SHANGHAI STATE-OWNED State-owned legal person 6.67% 3,000,000 0 0 3,000,000
ASSETS OPERATION CO., LTD.
NCF - MINSHENG BANK - CHINA FORTUNE Others 4.44% 2,000,000 0 0 2,000,000
INTERNATIONAL TRUST – CHINA
FORTUNE TRUST MIN XIN NO. 11
SINGLE CAPITAL TRUST
Connected relationship or connected The aforesaid holders of preference shares, “BANK OF COMMUNICATIONS INTERNATIONAL TRUST CO., LTD.
party relationship among the top ten - HUILI NO.167 SINGLE CAPITAL TRUST” and “BANK OF COMMUNICATIONS INTERNATIONAL TRUST CO.,
holders of preference shares, and LTD. - HUILI NO.136 SINGLE CAPITAL TRUST”, are persons acting in concert. Save for the above, it is not aware
between the top ten holders of that the remaining holders of preference shares are persons acting in concert, and it is also not aware whether
preference shares and the top ten there is any connected relationship between the above holders of preference shares and top ten holders of
holders of ordinary shares ordinary shares.
94 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3704827-t01fnar (Shandong Chenming) p.94 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:42
IX Preference Shares
III. Profit distribution for preference shares
√ Applicable Not applicable
Profit distribution for preference shares during the reporting period
√ Applicable Not applicable
Whether it is in
compliance with Whether it
the conditions Whether participates
Distributed and the relevant Way of it was an in distribution
Dividend amount procedures of dividend accumulated of remaining
Date of Distribution Ratio (tax inclusive) distribution payment dividend profit
17 March 2017 4.36% 98,100,000.00 Yes Cash No Yes
16 August 2017 5.17% 51,700,000.00 Yes Cash No Yes
24 August 2017 5.30% 119,277,108.41 Yes Cash No Yes
21 September 2017 5.17% 64,625,000.00 Yes Cash No Yes
Distribution for preference shares of the Company for the past three years
Unit: RMB
Explanation on
shortfall
Net profit accumulated to
attributable to Percentage to the next
shareholders of the net profit accounting year
listed company attributable to due to
under the shareholders of insufficient
consolidated listed company distributable
financial under the profits or portion
Distributed statements consolidated can be allocated
amount for the financial to remaining
Year of distribution (tax inclusive) distribution year statements profit distribution
2017 679,141,006.88 3,769,325,450.93 18.02% Chenming You 01,
Chenming You 02
and Chenming You
03 participated in the
proposal of remaining
profit distribution for
RMB464,716,006.88
in 2017.
2016 119,277,108.41 1,998,578,788.75 5.97% Chenming You 01
participated in the
remaining profit
distribution for
RMB119,277,108.41
in 2016.
2015 0.00 1,086,632,711.54 0.00%
Any adjustment or change in profit distribution policy for preference shares
Yes √ No
2017 ANNUAL REPORT
3704827-t01fnar (Shandong Chenming) p.95 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:42
IX Preference Shares
III. Profit distribution for preference shares (Cont’d)
Both earnings of the Company and retained profit of the parent company are positive during the reporting
period but without profit distribution for preference shares
Applicable √ Not applicable
Explanation on other matters regarding distribution for preference shares
√ Applicable Not applicable
Shareholders of preference shares participate in profit distribution in two portions, namely the fixed dividend distributed
based on a fixed dividend rate and the distribution of retained earnings realised for the year.
1. Distribution of fixed dividend
According to the Articles of Association, the Company shall distribute fixed dividends to holders of the preference
shares at fixed dividend rate if there are distributable profits after making good losses and the contribution to
reserve fund according to law. The Board is authorised by the general meeting to declare and pay all dividends on
the preference shares in accordance with the issuance plan under the framework and principles considered and
approved in the general meeting in respect of the preference shares. The general meeting of the Company has the
right to cancel part of or all of the current dividends on the preference shares. However, when the general meeting
of the Company will consider the cancellation of part of or all of the current dividends on the preference shares, the
Company shall inform the shareholders of preference shares at least 10 working days before the date of dividend
payment in accordance with the requirements of the related authorities.
2. Participation in the distribution of retained earnings realised for the year.
Holders of preference shares participate in the distribution of the retained earnings through receipt of cash which
is non-cumulative and non-deferrable. In the event of making good losses and the contribution to reserve fund
according to law, after receiving fixed dividends at fixed dividend rate as agreed, holders of preference shares can
also participate in the distribution of the retained earnings for the year in proportion. Specific terms are as follows: the
retained earnings for the year arises from net profit attributable to owners of the parent company on a consolidated
basis upon distribution of relevant fixed income to holders of financial instruments such as the preference shares
which may be classified under equity. 50% of the retained earnings shall be distributed to holders of preference
shares and ordinary shareholders. Holders of preference shares shall participate in the distribution of the retained
earnings by receiving cash dividends, and the ordinary shareholders shall participate in the distribution of the retained
earnings by receiving cash dividends or dividends on ordinary shares.
96 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3704827-t01fnar (Shandong Chenming) p.96 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:42
IX Preference Shares
IV. Repurchase or conversion
Applicable √ Not applicable
There was no repurchase or conversion during the reporting period.
V. Resumption of voting rights of preference shares
1. Resumption and exercise of voting rights
Applicable √ Not applicable
2. Shareholders and beneficial owner involved in resumption of voting rights of preference shares
Applicable √ Not applicable
VI. Accounting policy and reasons thereof
√ Applicable Not applicable
Pursuant to requirements of Accounting Standard for Business Enterprises No. 22 - Recognition and Measurement of
Financial Instruments, Accounting Standard for Business Enterprises No. 37 - Presentation of Financial Instruments and
Provisions for Differentiation between Financial Instruments and Equity Instruments and Relevant Accounting Treatment, the
preference shares were accounted for as equity instruments as their terms satisfied requirements for such treatments.
2017 ANNUAL REPORT
3704827-t01fnar (Shandong Chenming) p.97 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:42
X Directors, Supervisors and Senior Management and Staff
I. Changes in shareholding of Directors, Supervisors and Senior Management
Increase
Shares held in the number Decrease
as at the of shares in the number Other changes Shares held
beginning of held during of shares held (increase or as at the end
Start date End date the period the period during the decrease) of the period
Name Position Status Sex Age of the term of the term (shares) (shares) period (shares) (shares) (shares)
Chen Hongguo Chairman In office M 53 6 September 2001 18 May 2019 6,434,527 261,769 6,696,296
Yin Tongyuan Vice Chairman In office M 60 6 September 2001 18 May 2019 2,423,640 2,423,640
Geng Guanglin Director In office M 44 27 May 2009 18 May 2019 437,433 437,433
General manager In office 15 November 2017 18 May 2019
Li Feng Director In office M 45 19 April 2006 18 May 2019 471,818 471,818
Zhang Hong Director In office F 53 12 April 2010 18 May 2019
Yang Guihua Director In office F 52 9 May 2014 18 May 2019
Pan Ailing Independent Director In office F 53 15 May 2013 18 May 2019
Wang Fengrong Independent Director In office F 49 18 May 2016 18 May 2019
Huang Lei Independent Director In office M 61 18 May 2016 18 May 2019
Liang Fu Independent Director In office F 50 18 May 2016 18 May 2019
Li Dong Chairman of Supervisory Committee In office M 35 13 December 2016 18 May 2019 0 10,000 10,000
Sun Yinghua Supervisor In office F 49 18 May 2016 18 May 2019
Yang Hongqin Supervisor In office F 50 30 April 2007 18 May 2019
Zhang Xiaofeng Supervisor In office M 40 18 May 2016 18 May 2019
Li Xueqin Deputy general manager In office F 52 1 September 2004 18 May 2019 429,348 429,348
Hu Changqing Deputy general manager In office M 52 12 March 2010 18 May 2019 1,238 1,238
Hu Jinbao Financial controller In office M 51 16 November 2016 18 May 2019
Li Zhenzhong Deputy general manager In office M 44 20 March 2011 18 May 2019
Yang Weiming Deputy general manager In office M 43 18 May 2016 18 May 2019
Zhang Qingzhi Deputy general manager In office M 52 18 May 2016 18 May 2019
Poon Shiu Cheong Company secretary and In office M 48 28 May 2008 18 May 2019
qualified accountant
Xiao Peng Secretary to the Board Resigned M 35 16 November 2016 18 January 2018 0 111,600 111,600
Liu Jilu Supervisor Resigned M 51 18 May 2016 29 October 2017
Total 10,198,004 121,600 0 261,769 10,581,373
98 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3704827-t01fnar (Shandong Chenming) p.98 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:43
X Directors, Supervisors and Senior Management and Staff
II. Changes of Directors, Supervisors and Senior Management of the Company
√ Applicable Not applicable
Name Position Type Date Reason
Chen Hongguo General Manager Dismissed 09 November 2017 Dismissed from the
general manager
due to work
arrangement
Xiao Peng Secretary to the Board Dismissed 18 January 2018 Dismissed from the
secretary to the
Board due to
personal
work change
Liu Jilu Supervisor Resigned 29 October 2017 Resigned from
Supervisory due to
his personal work
2017 ANNUAL REPORT 99
3704827-t01fnar (Shandong Chenming) p.99 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:43
X Directors, Supervisors and Senior Management and Staff
III. Employment
Professional background, major working experiences and current duties at the Company of Directors, Supervisors and The
Senior Management
1. Brief biographies of Directors
(1) Brief biographies of executive Directors
Mr. Chen Hongguo, with Chinese nationality but without the right of permanent residence abroad, joined the
Company in 1987, had held different positions including chief officer of manufacturing section, chief officer of
branch factory, the chairman of Wuhan Chenming Hanyang Paper Holdings Co., Ltd., deputy general manager,
director and general manager of the Company etc. He is currently the chairman of the Company and the
chairman cum general manager of Shouguang Chenming Holdings Company Limited. Mr. Chen Hongguo is the
spouse of Ms. Li Xueqin, a deputy general manager of the Company.
Mr. Yin Tongyuan, with Chinese nationality but without the right of permanent residence abroad, joined the Company
in 1982, had held different positions including the chief officer of manufacturing section, the chairman of Wuhan
Chenming Hanyang Paper Holdings Co., Ltd., the chairman of Jilin Chenming Paper Co., Ltd., the chairman of
Jiangxi Chenming Paper Co., Ltd., the director of Shouguang Chenming Holdings Co., Ltd. and the deputy general
manager of the Company. He is currently the Director and deputy general manager of the Company.
Mr. Geng Guanglin, with Chinese nationality but without the right of permanent residence abroad, joined the
Company in 1992, had held different positions including the chief officer of manufacturing section of the Company,
deputy general manager of Chibi Chenming Paper Co., Ltd., the chairman of Wuhan Chenming Hanyang Paper
Holdings Co., Ltd., the chairman of Jilin Chenming Paper Co., Ltd. and the chairman of Jiangxi Chenming Paper
Co., Ltd. He is currently a Director and the deputy general manager of the Company, and a director of Shouguang
Chenming Holdings Company Limited, and is in charge of the operation of Zhanjiang Chenming.
Mr. Li Feng, with Chinese nationality but without the right of permanent residence abroad, joined the Company
in 1992, had held different positions including the chief officer of manufacturing section and assistant to the
general manager of the Company, deputy general manager and chairman of Wuhan Chenming Hanyang Paper
Holdings Co., Ltd.. He is currently the executive Director and deputy general manager of the Company in charge
of the sales of cultural paper products. Mr. Li Feng is the brother of Ms. Li Xueqin, a deputy general manager of
the Company.
(2) Brief biographies of non-executive Directors
Ms. Yang Guihua, with Chinese nationality but without the right of permanent residence abroad, is a doctor of
engineering, an advisor to doctoral students and an candidate for the Ten Million Talents Project (
). Ms. Yang is a professor of Qilu University of Technology, a standing director of Shandong
Technical Association of Paper Industry, a committee member of Nano and Composite Materials Committee of
China Technical Association of Paper Industry ( ) and evaluation
experts in National Natural Science Foundation of China. She has served as a non-executive Director of the
Company since May 2014.
Ms. Zhang Hong, with Chinese nationality but without the right of permanent residence abroad, holds a doctoral
degree in Economics. She is currently a professor and advisor to doctoral students at Shandong University,
head of a multinational corporation research institute, a non-practising member of the Chinese Institute of
Certified Public Accountants, a director of China Association of International Trade, a director of Shandong
Province External Trade Association, an independent director of Shandong Gettop Acoustic Co., Ltd., an
independent director of Shandong Zhangqiu Blower Co., Ltd., an independent director of Shandong Delisi Food
Co., Ltd. and an independent director of Cisen Pharmaceutical Co., Ltd.. She has served as an non-executive
Director of the Company since April 2010.
100 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3704827-t01fnar (Shandong Chenming) p.100 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:43
X Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
1. Brief biographies of Directors (Cont’d)
(3) Brief biographies of independent non-executive Directors
Ms. Pan Ailing, with Chinese nationality but without the right of permanent residence abroad, is currently a
professor of the School of Management, and the chief of the Investment and Financing Research Centre (
) in Shandong University. She is also a director of the Accounting Institute, Shandong Province (
), a council member of Shandong Comparative Management Association, a visiting professor at
Soochow University in Taiwan, and a visiting scholar at University of Connecticut in the United States. She is
also an independent director of Sinotruck Jinan Truck Co., Ltd. ( ) and Inspir
Software Co., Ltd. She has served as an independent non-executive director of the Company since May 2013.
Ms. Wang Fengrong, with Chinese nationality but without the right of permanent residence abroad, is a Ph.D.
in Economics and a visiting scholar at West Virginia University in the United States. She was previously a
lecturer at the Department of Finance of Shandong Economic University ( ) and an associate
professor at the Economic Research Center of Shandong University ( ). She currently
holds positions including professor and advisor to doctoral students at the Economic Research School of
Shandong University ( ) and Shandong School of Development at Shandong University (
), evaluation experts in both National Social Science Fund and National Natural Science
Foundation of China, guest analyst regarding policy implementation of currency and credit matters for the Jinan
branch of the People’s Bank of China, as well as the executive director of Shandong Young Social Science
Workers Association ( ). She concurrently serves as an independent director
of Shandong Xinneng Taishan Power Generation Co., Ltd. ( ) and Shandong
Denghai Seeds Co., Ltd.
Mr. Huang Lei, with Chinese nationality but without the right of permanent residence abroad, is a Ph.D. in
Economics. He was the chief of the Department of Finance and the dean of School of Finance in Shandong
University of Finance ( ). He currently holds the positions including the dean of School of
Finance in Shandong University of Finance and Economics, the director of the professor committee and the
deputy director of the academic committee of Shandong University of Finance and Economics, a member
of the Guiding Committee on Education of Financial Majors ( ) of the Ministry of
Education, a deputy director of the Collaborative Innovation Centre for Financial Optimisation and Regional
Development in Shandong ( ), a director of the Taishan Capital Market
Research Center ( ) of the Shandong University of Finance and Economics, a director of
the Shandong Capital Market Training Base ( ) as well as an independent director of
Wanjia Asset Management Co., Ltd.
Ms. Liang Fu, with Chinese nationality but without the right of permanent residence abroad, is a Ph.D. in
management, a Young and Middle-aged Expert with Outstanding Contributions in Shandong Province (
) and a visiting scholar at Tsinghua University. She concurrently holds the positions
including a professor and an advisor to doctoral students of the business school of Shandong University of
Finance and Economics, a visiting professor at Shandong Youth University of Political Science, an evaluation
expert in National Social Science Fund, a director of Talents Research Association of Shandong Higher
Education ( ), a director of Shandong Economic Association ( ),
an executive director of Shandong Management Association ( ), an independent director of
Shandong Shengli Co., Ltd. and an external director of Shandong Steel Group Co., Limited.
2017 ANNUAL REPORT
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OUTPUT: 27-03-2018 16:29:43
X Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
2. Brief biographies of Supervisors
Mr. Li Dong, with Chinese nationality but without the right of permanent residence abroad. After joining the Company
in 2004, he had held different positions including the deputy chief of cost auditing section and the chief of general
section under the financial department of the Company, the financial controller of Zhanjiang Chenming and the
chief of financial department of the Group. He is currently the director and deputy general manager of Shouguang
Chenming Holdings Company Limited and the chairman of the supervisory committee of the Company.
Mr. Liu Jilu, with Chinese nationality but without the right of permanent residence abroad, graduated from the School
of Economics and Management of China University of Geosciences with a master’s degree. He currently serves as an
associate professor of the accounting specialty of Weifang Vocational College and has years of teaching and practical
experience in financial accounting, financial management, audit and tax laws. He participated in the core training of
the preparatory courses for the accountant and certified public accountant examinations and was invited to conduct
seminars for the continuing education classes for the middle and high level accounting personnel in the Weifang City
for many times. He resigned as a supervisor of the Company on 30 October 2017.
Mr. Zhang Xiaofeng, with Chinese nationality but without the right of permanent residence abroad, graduated from the
School of Management of Shandong University with a doctorate’s degree and his research direction was corporate
strategies and corporate governance, traditional culture and modern management, etc. He currently serves as an
associate professor of the Business Management Discipline and the deputy head of the Department of Business
Management in the School of Management of Shandong University, offering management courses for undergraduate,
MBA, EDP and EMBA students for a long time as well as providing training to large enterprises both inside and
outside the province for hundreds of times. He concurrently holds positions including the committee member of
the Professional Committee of Corporate Governance in the PRC ( ), the part-time case
researcher of China Europe International Business School and the secretary general of Shandong Young Social
Science Workers Association ( ).
Ms. Sun Yinghua, with Chinese nationality but without the right of permanent residence abroad, is an associate
economist. She joined the Company in 1993, serving as price audit officer, audit director and other positions of the
Company, and is currently an assistant to the general manager of the Company responsible for the audit department.
Ms. Yang Hongqin, with Chinese nationality but without the right of permanent residence abroad, joined the Company
in 1987, serving as the chief officer of quality control section and the chief of after sale services department of the
Company and the manager of property management company, and is currently a Supervisor of the Company and
assistant to general manager of Shandong Chenming Power Supply Holdings Co., Ltd.
102 SHANDONG CHENMING PAPER HOLDINGS LIMITED
3704827-t01fnar (Shandong Chenming) p.102 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:43
X Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
3. Brief biographies of Senior Management
Ms. Li Xueqin, with Chinese nationality but without the right of permanent residence abroad, is a deputy general
manager of the Company. She joined the Company in 1987 and held the positions of the chief of audit department,
deputy general manager, etc. Ms. Li has been a deputy general manager of the Company and a director of Shouguang
Chenming Holdings Company Limited since March 2003. Ms. Li Xueqin is the spouse of Mr. Chen Hongguo, chairman
of the Company.
Mr. Hu Changqing, with Chinese nationality but without the right of permanent residence abroad, is a deputy general
manager of the Company. He joined the Company in 1988 and had held positions as the chief of the technological
reform department, chief officer of branch factory, deputy general manager and Director of the Company, etc. He is
currently the director of Shouguang Chenming Holdings Company Limited, a deputy general manager of the Company
in charge of the Huanggang Chenming Pulp and Paper project.
Mr. Li Zhenzhong, with Chinese nationality but without the right of permanent residence abroad, joined the Company
in 1995. He had served as principal representative of the Shanghai management region of a sales company, sales
manager of light weight coated cultural paper products. He is currently a deputy general manager of the Company
and marketing director of the Sales Company.
Mr. Yang Weiming, with Chinese nationality but without the right of permanent residence abroad, joined the Company
in 1998 and had held positions as the deputy manager, manager, general manager and principal representative of
Chenming Sales Company, and the deputy manager, leader in charge, and general manager of a product company.
He is currently a deputy general director of the Company in charge of overseas sales.
Mr. Zhang Qingzhi, with Chinese nationality but without the right of permanent residence abroad, joined the Company
in 1982 and had held positions as the chief officer of branch factory, head of the production department, assistant
to the general manager and vice production director. He is currently a deputy general manager of the Company in
charge of Shouguang Chenming.
Mr. Hu Jinbao, with Chinese nationality but without the right of permanent residence abroad, a senior project manager
in energy saving, joined the Company in 2016. He had held different positions including the director of the business
department and the vice president of the Shouguang sub-branch of Bank of China in Weifang City of Shandong
Province, the president of the Kuiwen sub-branch, the deputy director of the business department of the branch and
the president of the Changyi sub-branch of Bank of China in Weifang City of Shandong Province. He is currently the
financial controller of the Company.
Mr. Xiao Peng, with Chinese nationality but without the right of permanent residence abroad, holds a bachelor degree
in management. He had held different positions including the chief officer of the capital section, the chief officer of
information disclosure section, head of securities investment department, and representative of securities affairs of
the Company. He was the secretary to the Board of the Company during the reporting period. He resigned as the
secretary to the Board of the Company on 18 January 2018.
Mr. Poon Shiu Cheong is a Fellow Certified Public Accountant of Hong Kong Institute of Certified Public Accountants
and CPA Australia. He obtained a master degree in Accounting from Central Queensland University and a master
degree in Business Administration from Southern Cross University. He joined the Company in 2008, and is currently
the qualified accountant and company secretary of the Company.
2017 ANNUAL REPORT
3704827-t01fnar (Shandong Chenming) p.103 (P98738) 27-03-2018 16:29
OUTPUT: 27-03-2018 16:29:43
X Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
3. Brief biographies of Senior Management (Cont’d)
Employment at the shareholder of the Company
√ Applicable Not applicable
Whether receiving
any remuneration
Position at the or allowance from
Name of shareholder shareholder of the shareholder
Name of employee of the Company the Company Start date of the term End date of the term of the Company
Chen Hongguo Shouguang Chenming Holdings Chairman 22 September 2016 29 December 2020 No
Company Limited
Yin Tongyuan Shouguang Chenming Holdings Director 22 September 2016 29 December 2017 No
Company Limited
Geng Guanglin Shouguang Chenming Holdings Director 22 September 2016 29 December 2017 No
Company Limited
Li Xueqin Shouguang Chenming Holdings Director 22 September 2016 29 December 2020 No
Company Limited
Hu Changqing Shouguang Chenming Holdings Director 22 September 2016 29 December 2020 No
Company Limited
Li Dong Shouguang Chenming Holdings Director 29 December 2017 29 December 2020 No
Company Limited
Explanation of the Shouguang Chenming Holdings Company Limited held a general meeting on 29 December 2017 for re-election of new directors and
employment at the supervisors.
shareholder of
the Company
104 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:43
X Directors, Supervisors and Senior Management and Staff
III. Employment (Cont’d)
3. Brief biographies of Senior Management (Cont’d)
Employment at other units
√ Applicable Not applicable
Whether receiving
any remuneration
Position at the or allowance from
Name of employee Name of other units other units Start date of the term End date of the term other units
Zhang Hong Sinoer Men’s Clothes Co., Ltd. Independent director 05 September 2014 04 September 2017 Yes
Shandong Gettop Acoustic Independent director 16 September 2014 15 September 2017 Yes
Co., Ltd.
Shandong Zhangqiu Blower Independent director 12 July 2015 11 July 2018 Yes
Co., Ltd.
Shandong Delisi Food Co., Ltd. Independent director 26 September 2017 25 September 2020 Yes
Cisen Pharmaceutical Co., Ltd. Independent director 28 November 2017 27 November 2020 Yes
Pan Ailing Sinotruck Jinan Truck Co., Ltd. Independent director 28 April 2017 27 April 2020 Yes
Inspir Software Co., Ltd. Independent director 19 April 2017 18 April 2020 Yes
Wang Fengrong Shandong Xinneng Taishan Independent director 23 May 2017 22 May 2020 Yes
Power Generation Co., Ltd.
Shandong Denghai Seeds Co., Ltd. Independent director 12 May 2016 11 May 2019 Yes
Huang Lei Wanjia Asset Management Independent director 16 October 2015 16 October 2018 Yes
Co., Ltd.
Liang Fu Shandong Shengli Co., Ltd. Independent director 15 May 2015 15 May 2018 Yes
Shandong Steel Group External director 13 September 2017 13 September 2020 Yes
Co., Limited
Explanation of the On 2 February 2018, Shandong Gettop Acoustic Co., Ltd. issued the Announcement on Delay of Re-election for Board and Supervisory
employment at the Board. Prior to the completion of re-election for the Board of the Company, Zhang Hong would continue to carry out the obligations and
other unit duties of a director pursuant to the laws and regulations as well as the articles of association the company.
Sanctions against current Directors, Supervisors and Senior Management of the Company and those who
resigned during the reporting period by securities regulatory authorities in the past three years
Applicable √ Not applicable
2017 ANNUAL REPORT
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X Directors, Supervisors and Senior Management and Staff
IV. Remuneration of Directors, Supervisors and Senior Management
Decision process, basis for determining the remuneration and actual payment for the remuneration of
Directors, Supervisors and the Senior Management
(1) Determination basis for remuneration of Directors, Supervisors and the Senior Management: The annual remuneration
of each of the executive Directors and the Senior Management of the Company was in the band of RMB0.20 million to
5.00 million and the specific amount for each of them was determined by the remuneration committee based on the
main financial indicators and operation target completed by the Company, the scope of work and main responsibilities
of the Directors and Senior Management of the Company, the target completion of the Directors and Senior
Management as assessed by the duty and performance appraisal system, as well as business innovation capability
and profit generation ability of the Directors and the Senior Management. During the reporting period, the Company
will pay each of the independent non-executive Directors and non-executive Directors of the Company allowance of
RMB120,000 (before tax). The travel expenses for attending board meetings and general meetings of the Company
and fees reasonably incurred in the performance of their duties under the Articles of Association by independent non-
executive Directors and non-executive Directors are reimbursed as expensed. The annual remuneration of Supervisors
assuming specific managerial duties in the Company were determined by the general manager office of the Company
based on specific managerial duties assumed by them. Fixed annual remuneration policy was adopted on external
Supervisors who did not hold actual management positions in the Company. During the reporting period, the fixed
remuneration of external Supervisors was RMB25,000 (before tax).
(2) Decision process for remuneration of Directors, Supervisors and Senior Management: In accordance with the relevant
policies and regulations such as the Implementation Rules Of The Remuneration And Assessment Committee
Under The Board, any remuneration plan for the Company’s executive Directors proposed by the remuneration and
assessment committee shall be agreed on by the Board and then submitted to the general meeting for consideration
and approval prior to implementation. Any proposal of remuneration distribution plan for the Senior Management
officers of the Company shall be submitted to the Board for approval. The remuneration of independent non-executive
directors, non-executive directors and external supervisors of the Company shall be agreed on by the Board and then
submitted to the general meeting for consideration and approval prior to implementation.
(3) The remuneration and assessment committee, which was set up by the Board according to the resolution of the
general meeting, is mainly responsible to formulate the standards of, carry out appraisal in respect of the non-
independent Directors and Senior Management of the Company; formulate and examine the remuneration policy and
scheme of the non-independent Directors and Senior Management of the Company, and accountable to the Board.
106 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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X Directors, Supervisors and Senior Management and Staff
IV. Remuneration of Directors, Supervisors and Senior Management (Cont’d)
Decision process, basis for determining the remuneration and actual payment for the remuneration of
Directors, Supervisors and the Senior Management (Cont’d)
Unit: RMB’0,000
Total Received
remuneration remuneration
before tax from related
received from parties of
Name Position Sex Age Status the Company the Company
Chen Hongguo Chairman M 53 In office 499 No
Yin Tongyuan Vice-chairman M 60 In office 298 No
Geng Guanglin Director, General Manager M 44 In office 193.11 No
Li Feng Director M 45 In office 242.22 No
Zhang Hong Director F 53 In office 12 No
Yang Guihua Director F 52 In office 12 No
Pan Ailing Independent Director F 53 In office 12 No
Wang Fengrong Independent Director F 49 In office 12 No
Huang Lei Independent Director M 61 In office 12 No
Liang Fu Independent Director F 50 In office 12 No
Li Dong Chairman of Supervisory Committee M 35 In office 59.54 No
Sun Yinghua Supervisor F 49 In office 51.4 No
Yang Hongqin Supervisor F 50 In office 19.36 No
Zhang Xiaofeng Supervisor M 40 In office 2.5 No
Li Xueqin Supervisor M 52 In office 211.68 No
Hu Changqing Deputy general manager F 52 In office 200 No
Hu Jinbao Financial controller M 51 In office 180.65 No
Li Zhenzhong Deputy general manager M 44 In office 175.13 No
Yang Weiming Deputy general manager M 43 In office 135.7 No
Zhang Qingzhi Deputy general manager M 52 In office 61.79 No
Poon Shiu Cheong Company secretary and M 48 In office 12.85 No
qualified accountant
Xiao Peng Secretary to the Board M 35 Resigned 36.96 No
Liu Jilu Supervisor M 51 Resigned 2.08 No
Total — — — — 2,453.97 —
Directors, Supervisors and Senior Management of the Company granted share options as incentives during
the reporting period
Applicable √ Not applicable
2017 ANNUAL REPORT
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X Directors, Supervisors and Senior Management and Staff
V. Personnel of the Company
1. Number of staff, specialty composition and education level
Number of staff at the Company (person) 4,510
Number of staff at major subsidiaries (person) 9,069
Total number of staff (person) 13,579
Total number of staff receiving remuneration during the period (person) 13,579
Number of retired/resigned staff the parent comany and its principal subsidiaries
are required to compensate (person)
Specialty composition
Category of specialty composition Number of people (person)
Production staff 7,364
Sales staff
Technical staff 2,214
Financial staff
Administrative staff 1,746
Other staff 1,507
Total 13,579
Education level
Category of education level Number of people (person)
Postgraduate and above
Undergraduate 1,293
Post-secondary 3,039
Technical secondary and below 9,202
Total 13,579
108 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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X Directors, Supervisors and Senior Management and Staff
V. Personnel of the Company (Cont’d)
2. Remuneration policies
The remuneration of the employees of the Company includes their salaries, bonuses and other fringe benefits. Subject
to the relevant laws and regulations, the Company adopts different standards of remuneration for different employees,
which are determined based on their position, skill variety, performance etc. with reference to the remuneration level
in the market, the average level of salary in the society and the corporate reference line set by the government. The
Company provides various benefits to the employees, including social insurance, housing accumulation funds and
various holidays etc. The Company regularly investigated into the remuneration level, realising a fair job place with
incentives; and stipulated a differentiated analysis remuneration strategy to attract key personnel and enhanced the
Company’s overall human resources competitiveness benefiting the Company’s development and human resources
strategy.
3. Training programmes
The Company attaches importance to personnel training, implements the corporate spirit of “learning, surpassing
and leading” and establishes a learning organisation. In 2018, the Company will further enhance the cooperation with
management consultancies and professional training institutions in order to build a scientific training system, prepare
practical and efficient high-quality training materials and initiate targeted training programs by levels and by classes.
All employees are given training on corporate culture. For the junior level staff, the training focuses on professional
skills and business knowledge. For the middle level staff, the training focuses on team management and execution.
For the senior management, training focuses on leadership. A staff team of high quality is made through training.
4. Labour outsourcing
Applicable √ Not applicable
2017 ANNUAL REPORT
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XI Corporate Governance
I. Corporate governance in practice
The Company operated in compliance with the requirement of Companies Law ( ), Securities Law ( ),
Code of Corporate Governance for Listed Companies ( ), Rules Governing Listing of Stocks on
Shenzhen Stock Exchange ( ), the Listing Rules of Hong Kong Stock Exchange and the
related requirements as required by CSRC, and continued to improve and optimise its legal person governance structure
during the reporting period. The Company also continuously improved its internal control system and proactively carried
out management works in relation to investor relations during the reporting period, so as to further improve corporate
governance standards and promote the Company’s standardised operations. As of the end of the reporting period, the
actual practice of corporate governance complied with the requirements of the regulatory documents issued by the CSRC
regarding the governance of listed companies.
(I) Shareholders and general meeting
The Company had established a corporate governance structure that ensured shareholders’ ability to fully exercise
their rights and enjoy equal status. Shareholders enjoyed their rights and undertook corresponding obligations in
accordance with the shares held by them. The convening and holding of general meeting of the Company were legal
and compliant, and on the premise of guaranteeing the legality and effectiveness of the general meeting, both on-site
voting and online voting were provided as channels to participate in such meetings. Where significant matters which
had an impact on the interests of minority investors were being considered, the votes by minority investors were
counted separately for the convenience of shareholders and for the sake of making public and timely disclosures. At
the same time, investors present at the general meeting could communicate with the management of the Company in
person, which effectively safeguard the rights and demands of investors to participate in the Company’s management.
We ensured that all investors could participate in corporate governance on an equal basis, which effectively safeguard
the legitimate interests of shareholders, especially those of minority shareholders.
(II) Controlling shareholder and the listed company
During the reporting period, the Company remained independent of its controlling shareholder, beneficial controllers
and related parties in terms of its business, assets, finance, personnel and organisations, and complied with the
relevant provisions of the China Securities Regulatory Commission on the independence of listed companies. The
controlling shareholders and beneficial controllers strictly regulated their behaviour, and exercised their rights and
performed their obligations in accordance with the laws. The Company had business independence and self-operation
capability.
(III) Directors and the Board
The composition of the Board of the Company complied with the laws and regulations and the requirements of the
Articles of Association. Directors of the Company possessed the knowledge, skills, and qualities necessary to the
performance of their duties. All of them were able to earnestly, faithfully, and diligently perform their duties and powers
as stipulated in the Articles of Association. The convening and holding of Board meetings was in strict compliance
the Articles of Association and Rules of Procedure of Board Meetings and other relevant provisions. The four special
committees under the Board of the Company, namely the Strategic Committee, the Audit Committee, the Nomination
Committee and the Remuneration and Assessment Committee, performed their duties normally and provided
scientific and professional opinions for the decision-making of the Board.
110 SHANDONG CHENMING PAPER HOLDINGS LIMITED
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OUTPUT: 27-03-2018 16:29:45
XI Corporate Governance
I. Corporate governance in practice (Cont’d)
(IV) Supervisors and the Supervisory Committee
The Supervisory Committee strictly followed the requirement of relevant laws and regulations including the Companies
Law, the Articles of Associations and the Rules of Procedure of the Supervisory Committee in fulfilling its duties. In
the spirit of being accountable to the shareholders and the Company, the Supervisory Committee independently and
effectively exercised its supervision and inspection functions. By attending Board meetings and conducting regular
inspections on the legal compliance of the Company’s operations and finance, the Supervisory Committee supervised
the decision-making procedures of the Board, resolutions and the legal compliance of the Company’s operations, so
as to safeguard the legitimate interests of the Company and the shareholders.
(V) Information disclosure and management of investor relations
In accordance with the requirements of the relevant rules, the Company strictly enforced the relevant information
disclosure regulations and fully fulfilled its information disclosure obligations. The Company disclosed information in
a timely and fair manner and ensured that the information disclosed was true, accurate and complete, and did not
contain false information, misleading statements or major omissions. During the reporting period, the Company issued
a total of more than 490 periodic reports, interim announcements, and related documents through the designated
information disclosure media. The Company performed its information disclosure obligations in a timely manner with
respect to the Company’s operations, related party transactions, external investment, external guarantees, and the
implementation of annual profit distribution, so as to further safeguard the legitimate rights of investors.
Under the premise of strictly fulfilling disclosure obligations, the Company attached importance to the management
of investor relations. The Company made public our address, contact number, facsimile, e-mail and other information
on its official website and CNINFO, in an attempt to facilitate investors’ communication with the company through
the above channels. The Company also made full use of the investor hotline, Shenzhen Stock Exchange’s “EasyIR”
platform, field investigation and research and other channels and methods to actively interact with investors and
listen to what they had to say. We patiently answered questions from investors, and worked at enhancing investors’
understanding and recognition of the Company. We passed investors’ reasonable opinions and suggestions to the
management of the Company in a timely manner, building a bridge between investors and the Company.
(VI) Management on registration of personnel with insider information
The Company strictly complied with the provisions of the “Registration Management System of Personnel with Insider
Information” and other relevant systems to strengthen the confidentiality of insider information and improved the
registration and management of personnel with insider information. The Directors, Supervisors, Senior Management
and other related personnel of the Company were able to strictly observe their confidentiality obligations throughout
the preparation of periodic reports, temporary announcements and the planning of major events. With the
development of the Company, the Company will continue to strictly abide by the requirements of relevant laws and
regulations and continuously promote corporate governance to ensure that the Company operates in a standardised
manner.
Any material non-compliance of the regulatory documents on the governance of listed companies issued by the
CSRC in respect of actual governance of the Company
Yes √ No
There was no material non-compliance of the regulatory documents on the governance of listed companies issued by
the CSRC in respect of the actual governance of the Company.
2017 ANNUAL REPORT
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XI Corporate Governance
II. Particulars about the independence in terms of businesses, personnel, assets, organisations,
and finance from the controlling shareholder
The Company was completely separated from the controlling shareholder in terms of business, personnel, assets,
organisations and finance. The Company had a comprehensive internal structure, independent and complete businesses as
well as the capability of self-operation.
1. In terms of business: the Company had its own R&D, production, procurement and sales system, and was completely
independent of controlling shareholder in terms of business. The controlling shareholder and its other subsidiaries
were not competitors of the Company in the same industry.
2. In terms of personnel: the Company had an independent workforce, and had established independent departments
including the research and development department, production department, finance department, administration
department, procurement department and sales department. The Company had also established a comprehensive
management system with respect of labour, personnel and salary. Personnel of the Company were independent of
the controlling shareholder. The Company’s Chairman was elected at the general meeting, while the general manager,